The MacKay River and Dover oil sands projects owned by private Athabasca Oil Sands Corporation are located in the northeastern part of Alberta province, and have been independently assessed to hold about five billion barrels of bitumen.

Athabasca Oil reportedly searched for months for a partner to develop the projects.

And rumors of a pending deal pushed up shares of other oil sands firms as it showed outside interests were once again ready to invest in the sector after a brief hiatus, said the daily Globe and Mail.

"Oil sands projects are very capital-intensive long-term investments and difficult to fully finance in the traditional equity market," said Athabasca Oil chairman Bill Gallacher.

Athabasca Oil "therefore decided to look for joint venture partners," and a joint venture with PetroChina, "one of the world's largest energy companies, can ensure that the MacKay River and Dover projects will be developed in timely manner," he said.

The Canadian government was informed of the deal ahead of the announcement, Gallacher told a teleconference. The deal must now be approved by Canada's competition bureau.

"The reason why we chose PetroChina (as a partner) was their financial strength, but also their technological capabilities" in oil extraction, he said.

The two companies plan to use a relatively new "in situ method" to develop their oil sands projects, they said. This involves injecting steam underground to coax the viscous bitumen to the surface.

A more common method is to mine the oil sands and then separate bitumen from the sand.

Athabasca Oil said it has filed regulatory applications with Alberta's Energy Resources Conservation Board for two pilot projects on its leaseholds.

It also said it intends to seek approval for the first phase of the MacKay River project to start producing 35,000 barrels of oil per day by year end.

The deal is the latest in a global buying spree by China, which has seen the voracious giant buy up stakes in resource companies around the world to secure supplies for its growing economy.

In June, China's Sinopec, a subsidiary of China Petrochemical Corporation, agreed to purchase oil exploration firm Addax Petroleum for 7.2 billion dollars in the largest ever Chinese offshore acquisition.

China National Petroleum Corporation, meanwhile, paid 449 million dollars in February for Verenex Energy, although the deal has been stalled by authorities in Libya, where it has the bulk of its holdings.

And last year, Sinopec bought Calgary, Alberta-based Tanganyika Oil for two billion dollars.

At an estimated 173 billion barrels, the oil sands in western Canada are the second largest oil reserve in the world behind Saudi Arabia, but they were long neglected, except by local companies, because of high extraction costs.

Since 2000, skyrocketing crude oil prices and improved extraction methods have made exploitation more economical, and have lured several multinational oil companies to mine the sands.

But foreign investments dried up when a recession struck late last year.

To date, the United States remains the largest consumer of bitumen from the oil sands.

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