Canada approves CNOOC-Petronas deals
Ottawa, December 9, 2012
Canada approved China's biggest foreign takeover, the $15.1 billion bid by CNOOC for energy company Nexen, after the Chinese giant agreed to conditions, but drew a line in the sand against future purchases by state-owned enterprises.
In a fierce defence of a tough, new foreign investment framework, Prime Minister Stephen Harper said Canada would not deliver control of the country's oil sands - the world's third-largest proven reserves of crude - to a foreign government.
The ruling, anxiously awaited by investors and politicians, followed months of heated debate about how much of Canada's energy sector could and should be absorbed by companies run by other nations.
It also gave the go-ahead for the less controversial $5.3bn takeover of gas company Progress Energy Resources Corporation by another state-owned energy company Petronas of Malaysia.
The CNOOC bid triggered unusually open dissent among legislators in the ruling right-of-centre Conservatives, many of whom were nervous about the idea of allowing China to gain control of the sands.
Canada agreed to the deal, but will not do so next time.
"To be blunt, Canadians have not spent years reducing the ownership of sectors of the economy by our own governments only to see them bought and controlled by foreign governments instead," Harper said after Ottawa gave the deal the green light.
"Foreign state control of oil sands development has reached the point at which further such foreign state control would not be of net benefit to Canada," he added.
Top executives at CNOOC welcomed the green light for the deal. "We believe the transaction provides opportunities for Nexen employees, partners and us," CNOOC chief executive Li Fanrong said.
The approval came after CNOOC made a new commitment on transparency. That added to concessions on employment and capital investments it had outlined in July when it announced its bid for Nexen.
CNOOC said it will provide an annual compliance report to the Canadian government. Other commitments include making Calgary the headquarters of its North and Central American operations, retaining Nexen's management team and employees, seeking a secondary listing in Toronto and investing in Canadian sands over the long term.
The bid by CNOOC, China's third-largest oil company, had raised huge questions for Harper's Conservative government, which sought to appear open for investment and diversify Canadian energy exports towards Asia and away from the US.
The tougher new approach restricts state-owned enterprises to minority stakes in Canadian enterprises except in what Harper described as "exceptional circumstances".
Ottawa has yet to clarify the meaning of "exceptional circumstances", but its stance was met with scepticism not least because much of Canadian dollars 650 billion ($657 billion) in investment it says it needs in the natural resources sector in the next decade will probably have to come from abroad, including cash-rich China.
"To say you won't sell in the future is not reliable," said Lin Boqiang, director of the China Centre for Energy Economics Research at Xiamen University. "They probably said it to satisfy the views of some citizens."
Analysts said the new rules could please market operators who complain Ottawa is too vague about foreign investment it wants. Investment Canada, part of the industry ministry, must decide if takeovers are a net benefit for Canada, but critics say the process is opaque.-Reuters