China National Offshore Oil Co Limited (CNOOC), China's third largest oil company, Tuesday announced it has acquired 16.69 percent of MEG Energy, a Canadian oil and gas company, for 150 million Canadian dollars (US$123 million).

It is the first time CNOOC has bought into a foreign oil company. CNOOC has been active in acquiring overseas oil and gas reserves from Indonesia and Australia for expansion over the past four years.

MEG, based in Calgary, Canada, owns a 100 percent working interest in oil sand leases of 52 contiguous sections, or 32,900 acres, in Alberta, according to a statement from CNOOC.

It is estimated that the area boasts more than 4 billion barrels of bitumen, half of which are recoverable, it said.

Oil sand is composed of sand, bitumen, mineral rich clays and water. Bitumen, after upgrading, can be used to produce a light crude oil.

"I am excited about our low cost entry into oil sands, gaining a foothold in this high-potential area," said Yang Hua, chief financial officer and senior vice-president of CNOOC.

According to the Alberta Energy & Utilities Board, the total bitumen volume in Alberta is about 1.6 trillion barrels, more than 300 billion barrels of which are recoverable with current technology.

Fu Chengyu, chairman and CEO of CNOOC, said: "This move provides a good chance for us to exploit the advanced technology and expertise of oil sand development.

"These skills may help facilitate the exploitation of oil sand and shale in China, where large reserves have been found in recent years," said Fu.

Shares of CNOOC inched up 0.59 percent yesterday on the Hong Kong Stock Exchange to end at HK$4.28 (51.8 US cents).

On the back of the oil price hike and increased production, CNOOC posted a record profit of 16.2 billion yuan (US$1.96 billion) last year, surging 40.3 percent year-on-year.

(China Daily April 13, 2005)