The Canada-China Economic and Trade Cooperation Roadmap agreed between Ottawa and Beijing in January 2026 marks a thaw in the relationship that had largely frozen over the past decade. Accompanying that roadmap was a memorandum of understanding on strengthening energy cooperation that could help to facilitate renewed Chinese investment in Canada’s energy sector. Between 2018 and 2025, Chinese foreign direct investment (FDI) in Canadian natural resources collapsed under the combined weight of regulatory tightening, national security scrutiny, and geopolitical tensions between China and Canada. The new framework encourages a resumption of those capital flows at a moment when Canada faces immense financing requirements for energy infrastructure expansion.
Yet the strategic implications extend far beyond capital formation. Energy infrastructure increasingly sits at the intersection of economic policy, national security, and geopolitical competition. Pipelines, export terminals, electricity transmission networks, and digitalized grid systems constitute critical infrastructure whose ownership structures can influence supply chains, technological dependencies, and strategic leverage.
Chinese investment in Canadian energy therefore presents a dilemma. On one hand, access to Chinese capital could accelerate the development of export infrastructure necessary for Canada to expand its role as a major supplier of hydrocarbons and low-carbon fuels to Indo-Pacific markets. On the other hand, foreign participation in critical infrastructure introduces governance, cybersecurity, and geopolitical risks that must be carefully managed. These risks are magnified in the current era of intensifying great power competition where China stands as a challenger to the Western-led order.
The question facing Canadian policymakers is whether Chinese investment can contribute to energy infrastructure development without undermining Canada’s long-term security interests.
The Investment Canada Act (ICA) has been the principal legal mechanism through which this balance is determined, with the federal government enjoying a high level of discretion in determining approvals through that legislation’s foreign investment review process. The core test of ‘net benefit to Canada’ that projects must meet under the ICA is vague – perhaps purposefully so – which allows the government of the day to respond dexterously to the changing demands of a particular era.
With energy infrastructure policy increasingly functioning as geopolitical strategy by other means, federal decisions about capital flows today – in part through its application of the ICA – will shape the resilience, autonomy, and strategic alignment of Canada’s energy landscape for decades to come.
The Geoeconomics of Energy Infrastructure
During eras of less intense geopolitical competition energy infrastructure generally operates as an economic asset whose primary purpose is to move commodities efficiently from production zones to markets. In the contemporary geopolitical environment, however, infrastructure frequently functions as a form of structural power. The physical networks through which energy flows – pipelines, export terminals, refineries, and transmission grids – determine not only commercial outcomes but also the strategic flexibility and resilience of states.
Control over infrastructure shapes the direction, reliability, and political vulnerability of energy supply chains. Ownership structures can influence contractual relationships, investment priorities, and long-term export patterns. Even minority equity positions may provide investors with governance rights, operational visibility, and informational access that carries strategic implications.
For this reason, energy investment has increasingly become a domain of geoeconomic competition. States do not merely seek access to energy resources; they seek influence over the infrastructure that organizes global energy trade.
China’s overseas energy investment strategy reflects precisely this logic. Chinese national oil companies and state-linked investment vehicles have spent two decades acquiring stakes in upstream production, midstream infrastructure, and downstream refining assets around the world. This includes Canada, where Chinese state-owned enterprises (SOEs) China National Offshore Oil Corporation (CNOOC), PetroChina, and Sinopec are already present through wholly owned, controlling, and minority ownership stakes in various oil and gas extraction and support activities. While Chinese firms account for a relatively small proportion of total operating revenues (2.3%) in Canada’s energy sector as of 2023, they are the second-largest foreign owner of oil and gas extraction and support assets in Canada after American investors.
Although driven by clear commercial incentives, the cumulative effect has been to embed Chinese capital throughout the global energy system, securing long-term supply access while expanding Beijing’s structural presence in critical energy networks.
Within this broader strategy, Canada represents an attractive yet complicated investment destination. It possesses vast hydrocarbon reserves, expanding export capacity on the Pacific coast, and a stable rule-of-law investment environment. In fact, since the completion of the Trans Mountain Expansion (TMX) pipeline in May 2024, roughly 90% of Westridge Marine terminal shipments bound for Asia have been to China, the world’s biggest importer of crude oil.
The recent wartime disruption of energy through the Strait of Hormuz also serves to highlight Canada’s geographic advantage and comparative reliability as a supplier. China’s reliance on imports from the Middle East – where over half of its oil and thirty percent of its liquified natural gas originate – magnifies its susceptibility to instability in that region.
At the same time, Canada is embedded within the Western security architecture, deeply integrated with the United States, and increasingly attentive to national security concerns in foreign investment screening and major infrastructure development.
The 2026 MOU therefore reflects a recalibration rather than a full reset. It signals that both sides perceive potential gains from renewed investment cooperation, even as underlying geopolitical tensions persist.
Canada’s Infrastructure Imperative
Any potential resumption of larger scale Chinese capital inflows would arrive at a moment when Canada faces a profound infrastructure challenge. Expanding energy exports to global markets – particularly those in the Indo-Pacific – requires enormous investment in pipelines, liquefaction terminals, port facilities, electricity interconnections, and nascent supporting technologies such as carbon capture systems.
The capital requirements for this build-out are substantial. LNG export terminals alone typically require investments measured in the tens of billions of dollars, while pipeline expansions and transmission networks similarly demand long time horizons and large upfront financing commitments. The TMX pipeline cost approximately $34.2 billion, while the $40 billion price tag of LNG Canada and the associated Coast GasLink pipeline constituted the largest private investment in Canada’s history.
Domestic capital markets, while sophisticated, are not always sufficient to finance such large-scale infrastructure expansions on their own. International investment has historically played a major role in Canada’s energy sector, including participation from American, European, and Asian investors.
Chinese investors possess both the financial capacity and long-term investment horizons that infrastructure projects require. State-linked firms are often willing to accept extended payback periods in exchange for secure supply access and strategic positioning within global energy supply chains.
Prior to the rupture in Canada-China relations that occurred in 2018, China had emerged as one of Canada’s largest inward investment partners, with a substantial concentration of that investment going toward the conventional energy sector. From 2003 to 2018, 67% of the total $100 billion invested by China into Canada went to the energy sector—$22 billion of that directly to greenfield projects building new infrastructure.
But since PetroChina’s final investment decision on LNG Canada in 2018 as part of an international consortium, no major Chinese-origin investments have been made into Canada’s energy sector. That project, where PetroChina has a 15% ownership stake, is now Canada’s first West Coast LNG export terminal and began shipping LNG to Asia in July 2025.
In purely economic terms, therefore, renewed Chinese investment could help accelerate Canada’s transition toward becoming a major Pacific-facing energy exporter. Such capital could support LNG infrastructure on the West Coast, facilitate petrochemical and refining investments, and potentially contribute to other sectors such as hydrogen production and critical mineral processing.
However, the strategic consequences of infrastructure financing depend not solely on the source of capital but also on the governance structures attached to it.
Infrastructure Ownership and Strategic Vulnerability
Energy systems are increasingly recognized as ‘critical infrastructure’ in the national security sense of the term. Modern energy networks are deeply integrated with digital control systems, industrial software, and communications networks. This digitalization improves efficiency and operational control, but it also introduces new vulnerabilities.
Foreign investors with access to operational systems or governance structures may indirectly gain insight into infrastructure and operational data, logistical flows, and technical systems. Even without malicious intent, such informational access carries potential strategic implications in a world where cyber operations and economic coercion have become routine instruments of statecraft.
Ownership structures also influence the long-term evolution of infrastructure networks. Investors with strategic interests in particular supply relationships may advocate for contractual arrangements or export configurations aligned with their broader geopolitical priorities.
These concerns are not merely theoretical. The weaponization of energy infrastructure has become increasingly visible in recent years, most dramatically in the context of Europe’s energy relationship with Russia. Moscow’s ability to manipulate gas flows exposed the strategic risks inherent in infrastructure dependence.
Although Chinese investment in Canada would operate within a very different political context, the broader lesson remains relevant: energy infrastructure should be understood as a strategic asset whose governance has implications for national resilience.
Energy Security in an Era of Geopolitical Fragmentation
The global energy system is adjusting to a new period of geopolitical fragmentation. The assumption that energy trade operates independently of strategic competition is eroding rapidly. Instead, energy supply chains are being reorganized around political alignments, supply diversification strategies, and resilience concerns.
For NATO members, the concept of energy security now encompasses not only physical supply but also infrastructure ownership, investment flows, and technological dependencies. The strategic shocks produced by Russia’s invasion of Ukraine and the US-Israeli war with Iran demonstrate how energy systems can morph into instruments of geopolitical leverage when structural vulnerabilities exist.
Canada’s position within this dynamic is particularly sensitive. As a major energy exporter and a member of the NATO alliance, Canada’s infrastructure decisions influence not only its own economic trajectory but also the resilience of allied energy supply networks.
Strategic Policy Implications
The possible re-emergence of Chinese investment in Canada’s energy sector should not be viewed through a binary framework of acceptance or rejection. Instead, it requires a sophisticated governance strategy capable of capturing economic benefits while mitigating strategic vulnerabilities.
This approach reflects Prime Minister Carney’s attitude that relations with China should be based on clear-eyed engagement, pragmatism, and strengthening Canada’s strategic autonomy. China is too big economically and geopolitically to ignore, but engagement must be paired with strong domestic guardrails around investment screening and critical infrastructure protection.
Several policy principles emerge from this analysis.
First, national security review mechanisms must remain robust and forward-looking, but also become more holistic. The ICA already provides tools for screening foreign investments, but these mechanisms must be calibrated to recognize the evolving strategic significance of infrastructure ownership and data access. Beyond this, the screening mechanisms should properly weigh the national security benefits of accepting capital in cases where it enables infrastructure development – especially greenfield investments – that might otherwise not materialize and ultimately strengthen Canada’s energy export capacity and resilience.
Second, infrastructure governance structures should strongly prioritize operational control remaining in Canadian or allied hands. Minority financial participation by foreign investors may present manageable risks, whereas majority ownership of strategic assets – particularly by SOEs – would create structural vulnerabilities liable to exploitation in the event of any deterioration in the geopolitical environment. This has been the standard operating procedure applied through the ICA since the CNOOC purchase of Nexen in 2012, and should remain so.
Third, diversification of capital sources should remain a core objective. Infrastructure financed through a broad coalition that includes domestic and allied investors reduces the potential for concentrated strategic influence by any single actor while increasing the political and financial resilience of major energy projects.
Finally, cybersecurity and digital infrastructure protections must be integrated into energy governance frameworks, particularly in situations where foreign investors may gain visibility into operational technology or infrastructure data. As energy systems become increasingly digitized, the security of operational technology networks becomes inseparable from national energy security.
Taking these factors together, LNG Canada – a greenfield infrastructure development where a Chinese SOE constituted a minority stake within an international consortium – represents a good example of Chinese investment that provides mutual economic gain while balancing Canadian national security concerns.
Conclusion: Infrastructure as Strategy
The prospective return of Chinese capital to Canada’s energy sector illustrates a broader transformation in global energy politics. Energy infrastructure is again becoming a central component of geopolitical strategy, shaping supply chain resilience, economic autonomy, and strategic alignment.
For Canada, the challenge lies in reconciling two realities. The first is the immense capital requirement associated with building the infrastructure necessary to serve global energy markets. The second is the increasingly strategic nature of that infrastructure in a world defined by great power competition.
Chinese investment may offer opportunities to accelerate infrastructure development and expand Canada’s presence in Indo-Pacific energy markets. Conversely, though, the long-term consequences of infrastructure ownership structures must be evaluated with equal seriousness.
Energy infrastructure, once constructed, operates for decades. Decisions about financing and governance today will therefore shape the strategic resilience of Canada’s energy system far into the future.
In this sense, the January 2026 MOU between Canada and China should be understood not as a simple investment framework, but as a test case for how Canada intends to dexterously manage the intersection of energy policy, capital flows, and geopolitical competition in the 21st century.
