After Middle East turmoil, oil majors are looking to resurrect Canadian energy.

Shell's $16.4billion agreement to purchase ARC Resources is the most obvious sign of the change.

TotalEnergies, ConocoPhillips and Equinor are all companies that have been re-evaluating their Canadian competitors. According to interviews conducted with 12 people who were familiar with these discussions, companies have asked investment banks to create lists of potential acquisition targets. Foreign companies have been dumping fossil fuels in Canada for the past decade. Since the election of Prime Minister Mark Carney, Canada's leaders have become more pro-oil and gas. The war in Iran has also caused investors to seek safer environments. The country has opened new routes to export both natural gas and crude oil, which could encourage further development. It also has vast resources that are still undeveloped that could be used to supply its increasing exports. Shell's purchase of ARC is a concrete example of this broader reappraisal. The European?major announced on Monday plans to purchase ARC, Canada's largest natural gas producer focusing solely on the Montney shale area, making it one of the biggest foreign purchases ever of a Canadian company.

Mike Verney said that Shell's interest in Canada was "validating" and that the company has "world-class resources."

Sources said that there is no guarantee Total or another company will acquire Shell anytime soon given recent market volatility. The sources said that most of those they spoke to asked to remain anonymous because the discussions were private.

TotalEnergies and Equinor didn't immediately respond to requests for comments. BP and ConocoPhillips declined to comment.

EXODUS AND REVERSE

Canada's limited export and pipeline capacity has made it less attractive for investment compared to U.S. shales, renewable energy, and other growth areas. Investors were concerned about the environmental impact from producing heavy, tarry oils in the Alberta sands. This is Canada's most important oil-producing area.

This concentrated the energy sector of the country in Canadian hands. According to an analysis by Bank of Montreal, Canadian ownership of the oil sands will grow to 89% in 2025 compared to 69% in 2016.

Canada is now in a better position due to domestic politics and the global conflict. The tensions around the closed Strait of Hormuz have elevated Canada as the fourth largest oil producer in the world. Carney also has a more favourable stance towards oil and gas than Justin Trudeau. He pledged to grow the industry, and rolled back some climate regulations.

When you are looking for energy, and wondering what could possibly go wrong, Canada is a great place to be, said Jose Valera of the law firm Mayer Brown.

The Shopping List

The emerging export capacity of liquefied gas from Canada's Pacific coast offers direct shipping to Asia. Total bought a stake last year in the proposed Ksi Lisims LNG on British Columbia's northwestern coast. If approved, this project could be Canada's second largest LNG export terminal. Shell and its partners started producing LNG Canada in June last year. A decision is expected on the second phase of the project.

Investors are looking at the upstream assets that supply these facilities because of their involvement in such projects, especially the Montney - a massive shale formation that spans northeast British Columbia to northwest Alberta. ARC, Tourmaline Oil, and other domestic producers dominate the area, which is still relatively underdeveloped compared to U.S. basins like the Permian.

The country is the fifth largest natural gas producer in the world. About 50% of Canada's production comes from the Montney, which produces 10 billion cubic foot per day. According to U.S. statistics, the Permian produces 25 bcfd. Majors have more financial resources to make acquisitions now that crude prices are higher. The pool of potential takeover targets has been reduced since ARC was taken off the market.

Three people have said that Canada's biggest natural gas producer Tourmaline Oil could be a target. The C$18billion ($13,2billion) company's share price has been flat for the last year.

Mike Rose, 68 years old, is the CEO. Some sources said that a sale could solve succession issues.

Tourmaline has declined to comment.

Smaller producers, such as those backed by private equity, could be rolled up too.

(source: Reuters)