CALGARY - Athabasca Oil Corp. confirmed Friday that it is in the early stages of forming a joint venture for two of its Alberta oilsands properties.

The news followed a report in the Globe and Mail that Kuwait's state-owned petroleum company is looking to invest as much as $4 billion in an oilsands partnership.

The newspaper quotes Kuwait's Ambassador to Canada, Ali al-Sammak, as saying the deal with Athabasca (TSX:ATH) should be finalized by October.

Athabasca said it made the announcement at the behest of the Investment Industry Regulatory Organization of Canada. Trading in the company's shares had been halted on the Toronto Stock Exchange pending news.

After trading resumed Friday, the stock — which was the second most heavily traded of the day — closed up 8.5 per cent to $13.58.

"Athabasca confirms that it has signed a letter of intent that contemplates a joint venture involving Athabasca's Hangingstone and Birch properties," the company said in a release, which did not identify the potential joint-venture partner or specify the value of the deal.

Whether the proposal goes ahead depends on a number of things, including internal and regulatory approvals, Athabasca said.

"Athabasca cautions that no assurance can be given that the transaction contemplated by the letter of intent will be completed."

Some foreign investments are subject to review by the federal industry minister, who must decide whether they are of net benefit to Canada. Generally, acquisitions worth more than $330 million trigger such a review.

How exactly the assets would be divvied up in a potential deal between Athabasca and the Kuwaiti company remains to be seen, so it's not clear whether it would have to go through that process.

Hangingstone, 20 kilometres southwest of Fort McMurray, Alta., is expected to start producing oil in late 2014. Athabasca says it has the potential to produce more than 80,000 barrels a day.

The Birch property, 105 kilometres northwest of Fort McMurray, Alta., is not as far along in its development. Athabasca plans to submit a regulatory application later this year for its first 12,000 barrel per day phase. It says Birch has the potential to produce 155,000 barrels a day.

Athabasca would use steam-assisted gravity drainage technology to extract the bitumen at both sites. SAGD involves injecting steam deep underground, making it thin enough to flow to the surface through a pipe.

Athabasca has also been testing new technology using electrical cables to heat the bitumen, eliminating the need for water.

Athabasca publicly stated last month that it was looking for a partner to help develop its properties.

"The company has undertaken joint-venture initiatives during the first six months of 2012 and we are confident that an oilsands joint venture agreement may be concluded during the third quarter,'' CEO Sveinung Svarte said on a July 26 conference call to discuss the company's second-quarter results.

Athabasca is no stranger to joint ventures. In 2009, Athabasca sold a 60 per cent interest in its MacKay River and Dover oilsands lands to PetroChina.

Earlier this year, Athabasca exercised its option to sell the rest of MacKay River to PetroChina, making it the first oilsands operation to be fully controlled by a Chinese company.

Another Chinese state-owned outfit, China National Offshore Oil Company, has reached a deal to buy Nexen Inc. (TSX:NXY) for $15.1 billion, which would give it full control of the Long Lake oilsands project in northern Alberta. Industry Minister Christian Paradis is weighing whether the deal is of net benefit to Canada.

The Dover project is expected to obtain regulatory approval early next year and once it does there will be an identical divestiture option.

"You don't do JVs because you think they're fun. You do JVs because you need the financing,'' said Svarte on the July conference call.

"These are items that take time, but it's important to get them right up front because they can be very large value drivers, especially (since) some of these partners we look at are people who can bring markets and help us also to commit to pipelines in the future.''

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