PetroChina is facing hurdles as it seeks to buy a stake in the South Bow pipeline

PetroChina Canada Ltd. has run into obstacles as it seeks to take full ownership of Alberta’s pipeline system.

The Canadian arm of the Chinese state-owned energy giant has a partial interest in the Grand Rapids Pipeline, South Bow Corp. while in Calgary holding the rest.

The Grand Rapids runs 460 kilometers between the oilsands region of northeastern Alberta and the Edmonton area.

PetroChina sought to acquire South Bow under an option contained in their agreement that included a 30-day time limit, said a written decision of the Alberta Court of King’s Bench posted online last week.

“The proverbial fly-in-the-ointment is a requirement for two federal mandates,” wrote Justice Douglas Mah, who delivered his oral decision in December.

“First, due to the size and nature of the transaction, an exemption is required under the Competition Act,” wrote Mah.

“Secondly, because PetroChina is a Chinese state-owned company, its acquisition of South Bow’s interest in the pipeline must be reviewed for profit under the Investment Canada Act. Both of these approvals take time to obtain,” added Mah.

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PetroChina gave South Bow formal notice to exercise the purchase option on Nov. 21 and tendered the draft purchase and sale agreement.

It also requested that the timeline be extended from 30 days to the actual date of obtaining government approvals or that the closure be made conditional upon the approvals being in place.

Three days later, South Bow responded that it would not change its agreement with PetroChina and that the partner’s notice to exercise its option “was inconsistent because the approvals had not been received,” Mah wrote.

That would have set the option’s expiration date at Dec. 24.

As it was impossible to get permits before Christmas Eve, PetroChina turned to the dispute resolution process under its agreement with South Bow.

PetroChina asked Mah to issue an order to prevent the option period from expiring while the two companies try to resolve the dispute through arbitration, “which is likely to take several months down the road,” the judge wrote.

Mah rejected PetroChina’s request, saying he was not sure the company would have suffered “irreparable harm” without the legal order.

“PetroChina claims that the irreparable damage is the loss of the option, but that can be recovered by the court and that is exactly what PetroChina is asking for in the settlement,” Mah wrote.

“In my view, the harm would be irreparable if the petitioner could be placed in the position he wants to be in by the decision maker who makes the final decision. South Bow disputes that outcome but agrees that the trial court has the authority to make that decision.”

PetroChina reached its Grand Rapids construction deal in 2012 with TransCanada Corp., now known as TC Energy Corp. (TC started its South Bow pipeline business in late 2024) and has been operating since 2017.

The construction price at that time was three billion dollars. The court’s recent decision did not include revised estimates.

Neither South Bow nor PetroChina Canada immediately responded to a request for comment.

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