CALGARY, Alberta-China's Cnooc Ltd. sold off its majority stake last month in a small Canadian oil and gas venture, according to an executive in the company, a sign the state-controlled energy giant is retrenching after spending billions to establish a foothold in the North American market.
Five years after buying 60% of Northern Cross (Yukon) Ltd., a privately-held firm with exploration leases in a remote area of the Canadian north, the Chinese company sold its stake to Canadian investors who held minority shares, the Calgary-based company's president said.
The move comes as Cnooc struggles to deal with a slump in global oil prices and a troubled $15 billion investment in Canada's oil sands, one of China Inc.'s largest overseas investments ever. In July, the company's local subsidiary, Nexen Energy ULC, said it was reviewing the long-term viability of its operations after accidents at two key oil sands facilities that slashed production.
Richard Wyman, Northern Cross's president, declined in an interview to disclose the value of the deal. "We're now a wholly Canadian-owned company," he said.
Representatives for Cnooc in Beijing and Nexen in Calgary had no immediate comment.
China's state-owned oil companies have been hit hard by sinking prices for crude oil and weak demand for refined oil products. In August, Cnooc reported a 7.7 billion yuan ($1.1 billion) net loss for the first half of the year, compared with a 14.7 billion yuan net profit in the first six months of 2015, in part due to a large write-down on asset valuations in Canada and elsewhere.
Like the Chinese energy giant's other investments in Canada, the $100 million Yukon drilling program has faced a series of roadblocks that have slowed the path toward profitability.
Northern Cross is seeking to drill test wells in Yukon Territory, which currently produces no oil and natural gas. The company, which was set up in 1994, wants to tap into an estimated trillions of cubic feet of gas and millions of barrels of oil trapped under the permafrost in one of the last unexplored frontiers for energy development.
The project could allow Northern Cross to supply all of Yukon's small consumption volumes and possibly export natural gas and oil to foreign markets, such as China. That attracted interest from Cnooc, which bought its stake in June of 2011, a precursor to more ambitious investments in Canada over the following two years.
But Northern Cross hasn't been able to secure needed government approval in the face of strong opposition from environmental groups. The fate of the project, which is currently in limbo awaiting permitting, may hang on the outcome of a federal court ruling expected early next year.
Northern Cross filed suit against the Yukon Environmental and Socio-Economic Assessment Board in March a month after the territorial regulator said it couldn't make a decision on the company's plan to drill 20 test wells due to concerns about the potential impact on migratory caribou. The company wants to force the board to make a decision based on available data, which it hopes will allow it to move forward with the test drilling program, Mr. Wyman said.
"There's a lot of balls in the air and I'm not sure how they're all going to land. But it's not exactly the most business-friendly environment, I can tell you that," he said.
Brian Spegele contributed to this article.
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