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Enbridge May Offer China Oil-Sands Pipeline Stake

CALGARY, Alberta (Reuters) - Enbridge Inc. may offer an equity stake in a Canadian oil sands pipeline to a Chinese investor, but is concentrating efforts on attracting shippers for the C$2.5 billion ($2 billion) proposal, a spokesman said on Thursday.

Enbridge, the country's second-largest pipeline company, has spent more than 2-1/2 years planning its Gateway pipeline to the West Coast from Alberta, a project aimed at opening Asian and California markets to the vast resource.

As the world's No. 2 oil consumer, China and its various energy interests have been showing keen interest in Canadian oil sands, reserves of which rival Saudi Arabia's conventional crude reserves.

There is potential for Enbridge to hive off a stake in the 400,000-barrel-a-day Gateway project, targeted for start-up after 2009, spokesman Ian La Couvee said.

But he would not confirm a New York Times report on Thursday that the company, best known as operator of the main crude oil export pipeline to the United States, was in talks to offer 49 percent of the pipeline to a Chinese energy company.

"Our initial priority is to get commitments for volumes," La Couvee said.

He said Enbridge has received strong interest from refiners in China, as well as Japan and South Korea, in gaining access to synthetic oil wrung from the oil sands, a complex process known for high capital and operating costs but low political risk.

"But we do not yet have concrete commitments (for shipping contracts). We're hoping to secure those early in 2005," he said.

The 1,200 km (750 mile) pipeline would extend across the Rocky Mountains to near Prince Rupert, British Columbia, from Edmonton, Alberta. The crude would be loaded on to tankers for shipment across the Pacific Ocean and down the U.S. West Coast.

Executives have said they were aiming for Asian and California markets only after it was clear that key U.S. regions, including the Midwest, were well served by supply from Alberta's oil sands developments, target of tens of billions of dollars of investments.

It is not the only such proposal on the drawing board.

Early this month, Terasen Inc. said it was aiming for Asian refiners with a planned expansion of its 250,000 bpd Trans Mountain pipeline system, and was looking for expressions of interest from potential shippers.

The long-term plan is boost capacity to as much as 850,000 bpd at a cost of about C$2.3 billion.

Chinese energy officials have also been examining the oil sands industry for possible development projects to help meet what is widely expected to be a huge growth in demand for oil imports into their country.

In addition, shares in oil producer and refiner Husky Energy Inc. surged in November on speculation that its majority owner, Hong Kong magnate Li Ka-shing, was in talks to sell out to a Chinese oil company.

Husky is planning two large Alberta oil sands projects, called Tucker and Sunrise.

($1=$1.24 Canadian)

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