Canada urged to allow CNOOC's Nexen bid

Canadian business leaders support US$15b sale of local oil and gas producer as Chinese seek access to oil sands deposits

PUBLISHED : Thursday, 27 September, 2012, 12:00am
UPDATED : Thursday, 27 September, 2012, 3:25am

Some of Canada's top executives are urging their government to approve CNOOC's takeover of Nexen while calling on it to curb foreign companies' power to buy Canada's biggest oil and gas producers.

The government probably would permit the US$15.1 billion bid, given the small share of Nexen's assets based in Canada and the need for the nation to deepen ties with China, Jim Prentice, vice-chairman of Canadian Imperial Bank of Commerce, said in Ottawa yesterday.

"The government will see the wisdom to approve that transaction, and I think the Canadian public can be convinced of it because it's in Canada's interests," said Prentice, who was industry minister in 2008 when Canada blocked the acquisition of MacDonald Dettwiler by a United States company. It was the first time Canada had rejected an acquisition under its foreign-takeover law in effect since 1985.

Prime Minister Stephen Harper's policy of selling more of the nation's natural resources to Asia - which he calls a "national priority" to help boost economic growth - is being tested by concern among Canadians about the sale of Calgary-based Nexen to a state-owned firm.

China is seeking greater access to Canada's oil sands, the world's third-largest pool of reserves, to support growth.

Opposition politicians have called on Harper's majority Conservative government to hold public consultations on the deal, while industry minister Christian Paradis, whose department was reviewing the transaction, has said it would be "scrutinised closely".

Canada would probably be more reluctant to approve the takeover if CNOOC were attempting to acquire Suncor Energy, Canada's largest energy company, said former industry minister John Manley,

"If it were Suncor, you would have a different set of questions being asked, simply because of its scale and its importance in the Canadian context," Manley said. Suncor is Canada's "biggest independent, and that puts it in a somewhat different category".

The government should send a quiet signal to the Chinese if they don't want to see acquisitions on a "much larger scale", he said.

While the Nexen bid was "path breaking", it presented the government with fewer difficulties than BHP Billiton US$40 billion hostile takeover of Potash Corp, Manley said. The government rejected that acquisition in 2010.

"Nexen is an important company, but it's not as unique as Potash was in its sector nor is it even by any means one of the biggest Canadian companies," Manley said. Potash is the world's largest fertiliser producer.

Asian state-owned enterprises had the ability to "influence overall activity" in Canada's oil and gas sector because of the "distinct competitive advantage" such companies had over domestic firms, CIBC said in a report distributed yesterday at the conference.

The government "needs to maintain Canada's openness to foreign capital within a policy framework that maintains a strong Canadian market presence in the oil sands", CIBC, the country's fifth-biggest lender by assets, said.

Meanwhile, CNOOC has sent documents to banks containing proposed terms for a US$6 billion loan to finance the bid for Nexen, which would be the biggest overseas takeover by a Chinese company, a source said.

China's largest offshore oil and gas explorer approached various banks, including lenders from Singapore, China, Australia, Europe and the US, the person said. Citigroup was CNOOC's financial adviser, the person said.

Nexen said last week that 99 per cent of common shareholders voted for the deal, which still needed approval from Canadian, US and British authorities.