OTTAWA/HONG KONG: Canada approved China’s biggest ever foreign takeover, the $15.1bn bid by CNOOC Ltd for energy company Nexen Inc, after the Chinese giant agreed to various 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 alike, 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 Corp by another state-owned energy company, Petronas of Malaysia.
The CNOOC bid had triggered unusually open dissent among legislators in the ruling right-of-centre Conservatives, many of whom were particularly nervous about the idea of allowing China to gain control of the oil sands.
Canada agreed to this 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 told reporters 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 Canada’s greenlight for the deal.
“We believe the transaction provides opportunities for Nexen employees, partners and for CNOOC,” CNOOC Chief Executive Li Fanrong said in a statement.
The approval came after CNOOC made a new commitment, on transparency. That added to other concessions on employment and capital investments, which it had outlined in July when it announced its bid for Nexen.
CNOOC said yeserday 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 oil 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 both to appear open for investment and to diversify Canadian energy exports toward Asia and away from the United States.
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 some skepticism not least because much of the C$650bn ($657bn) in investment it says it needs in the natural resources sector in the next decade alone will probably have to come from abroad, including cash-rich China.
Reuters
