As the Chinese continue to vie for the world's energy resources, they are expected to move into Canada in the next year so aggressively that they are predicted to rival the U.S. as the most active foreign investors in Canadian energy resources. This is according to a survey of Canadian oil-industry executives and investment bankers conducted for Canadian law firm Blake, Cassels & Graydon LLP by research firm The Mergermarket Group. The survey results reveal that executives in the oil patch are evenly divided about which country's investors will be the most active in Canada, but they agree that both China and the U.S. will be the primary sources of foreign merger and acquisition interest in Canada, even though China is not currently a large player there. "While China is a relatively small player in the Canadian oil and gas sector today, we are seeing enormous interest from Chinese investors in Canada," says Craig Spurn, a partner in the law firm and head of the oil and gas practice. "The survey results reflect this intensified interest and the expectation it will translate into much more activity in 2006. It has very significant implications for the oil business in Canada." Survey participants believe the oil-sands and upstream conventional sectors will generate the most crossborder M&A growth in 2006. The attractiveness of the oil-sands sector is also a new trend, brought on by high oil and gas prices. Spurn notes that, if strong prices continue, increased M&A activity in the oil-sands sector is expected. According to the survey results, nearly half of the participants think prices will increase in the next six months, while two-thirds are confident current prices will be sustained over the long term. The survey also revealed that 91% of participants expect the level of private-equity transactions involving Canadian companies will increase or remain the same in 2006, while 70% believe this will increase. They also list price volatility and a lack of skilled labor as their biggest challenges in the coming year.
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