Canada’s government has approved China’s biggest overseas energy acquisition, a €11.7bn takeover by state-owned CNOOC of oil and gas producer Nexen.
But the Canadian prime minister vowed to reject any future foreign takeovers in the oil sands sector by state-owned companies.
Stephen Harper said the government would only consider future takeover deals in the oil sands by state-owned companies in exceptional circumstances.
“To be blunt, Canadians have not spent years reducing ownership of sectors of the economy by our own governments only to see them bought and controlled by foreign governments instead,” he said.
Mr Harper’s Conservative government has been studying whether CNOOC’s deal and a smaller foreign takeover, Malaysian state-owned oil firm Petronas’ £3.2 billion bid for Progress Energy, represent a “net benefit” to the country. The Harper government also approved the Petronas deal yesterday.
The prime minister’s comments show he is determined to keep foreign companies that are state-owned out of the oil sands in the future. Analysts say a firm like Suncor, Canada’s largest oil company, is off limits while a mid-tier company like Nexen was deemed to be an acceptable takeover target.
Concerns had been raised that approvals could lead to a flood of deals that put control of Canada’s vast energy resources in foreign hands, but Mr Harper said the deals should be seen as the end of a trend and not the beginning.
“I do not believe that any major industrialised country would allow a major sector of its economy to be transformed into the property of a foreign government through a couple of transactions,” he said.
The prime minister noted that 15 companies dominated production in the Alberta oil sands and the sector represented 60% of all the oil production around the world not already in state hands, saying he wanted to keep it that way.
Alberta has the world’s third-largest oil reserves after Saudi Arabia and Venezuela: more than 170 billion barrels. Daily production of 1.5 million barrels from the oil sands is expected to increase to 3.7 million in 2025.
“Very quickly a series of large-scale controlling transactions by foreign state-owned companies could rapidly transform this industry from one that is essentially a free market industry to one that is effectively under the control of a foreign government,” Mr Harper said.
CNOOC and other big state-owned Asian energy companies have increased purchases of oil and gas assets in the Americas as part of a global strategy to gain access to resources needed to fuel their economies. Chinese companies have moved more carefully since CNOOC tried seven years ago to buy Unocal but was rejected by US politicians who cited national security fears.
Harper’s government originally turned down Petronas’ bid for Progress Energy in October. The government did not publicly explain the decision to block the deal but said a new policy framework for foreign takeovers would be released soon. Petronas was allowed to reapply.
Mr Harper’s Conservative government also rejected Anglo-Australian BHP Billiton’s hostile takeover bid for Potash in 2010 and the sale of Vancouver-based MacDonald, Dettwiler and Associates’ space-technology division to an American company in 2008.
But he has lobbied the Chinese to invest in Canada’s energy sector and has said foreign investment is needed to develop Canada’s vast oil and gas deposits. Turning down CNOOC’s bid would have harmed relations with China.
China’s growing economy is hungry for Canadian oil. Chinese state-owned companies have invested billions in Canadian energy in recent years.
Nexen, a mid-tier energy company in Canada, operates in western Canada, the Gulf of Mexico, North Sea, Africa and the Middle East, with its biggest reserves in the Canadian oil sands.
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