PetroChina Canada Ltd. faces challenges in its bid to acquire full ownership of an Alberta pipeline network. The Canadian division of the Chinese state-owned energy conglomerate currently co-owns the Grand Rapids Pipeline with Calgary-based South Bow Corp. This pipeline spans 460 kilometers from the oilsands region in northeastern Alberta to the Edmonton area.
According to a recent Alberta Court of King’s Bench decision, PetroChina intended to purchase South Bow’s stake within a 30-day timeframe outlined in their agreement. However, two government approvals were necessary for the transaction to proceed smoothly. The first authorization involved a dispensation under the Competition Act due to the transaction’s size and nature. The second authorization required a net benefit review under the Investment Canada Act because PetroChina is a Chinese state-owned enterprise. Obtaining these approvals was a time-consuming process.
After PetroChina formally notified South Bow of its intention to exercise the buyout option and presented a draft purchase agreement on November 21, it requested an extension beyond the initial 30 days to secure the required government approvals. South Bow rejected this request, claiming PetroChina’s notice was invalid as the necessary authorizations had not been obtained. With the option set to expire on December 24 and knowing that approvals could not be obtained by then, PetroChina sought dispute resolution through arbitration as per their agreement with South Bow.
In response to PetroChina’s application for an injunction to prevent the option from expiring while arbitration took place, Justice Mah denied the request. He deemed PetroChina’s argument of irreparable harm unconvincing, stating that the harm could be rectified through the arbitration process. The judge highlighted that PetroChina could be reinstated to its desired position through the arbitration tribunal’s decision-making.
The Grand Rapids Pipeline was established in 2012 through an agreement between PetroChina and TransCanada Corp., now TC Energy Corp. The construction cost at the time was $3 billion, but no updated valuation was provided in the recent court ruling.
Both South Bow and PetroChina Canada did not immediately respond to requests for comments on the matter.
