Chinese state firms to slow investment in Canada

Ottawa's curbs on oil and gas acquisitions by state sector will spur rush by private firms

PUBLISHED : Monday, 16 December, 2013, 4:28am
UPDATED : Monday, 16 December, 2013, 3:08pm

Oil and gas acquisitions in Canada by Chinese state-owned enterprises will slow in the wake of Ottawa's restrictions after CNOOC's purchase of Nexen, said speakers at the Global Resource Investment Conference last week.

However, private Chinese companies were eagerly rushing to buy Canadian oil and gas assets, they added.

The value of Chinese acquisitions of oil and gas assets would see flat growth next year, said Gilbert Chan, president of NAI Interactive, a Canadian investor relations firm specialising in energy and mining.

"There are more restrictions on [state firms] to buy Canadian companies. So we will see uncertainty slowing acquisitions [by Chinese state firms], but more private Chinese companies [will be] buying," he said.

The deal size would be smaller due to restrictions on investments by state firms worldwide announced by Canadian Prime Minister Stephen Harper in December 2012, Chan added.

Harper signalled his government's preference for private foreign investments over investments by state firms, said a report by Canadian law firm Osler. He said the minister of industry would approve the acquisition of a Canadian oil-sands business by a foreign state firm "only in an exceptional circumstance", the report added.

Harper announced the investment restrictions at the same time the Canadian government approved the US$15 billion acquisition of energy firm Nexen by CNOOC, a Chinese state-owned oil major.

Since then, the biggest Chinese purchase of Canadian oil and gas assets was the C$232 million (HK$1.7 billion) acquisition in September of Novus Energy, a Toronto-listed firm, by Yanchang Petroleum International, a Hong Kong-listed oil and gas firm, Chan said.

The value of mergers and acquisitions of Canadian oil and gas assets dropped to C$80 billion in the first half of the year from C$113.2 billion last year, Chan said. On the Toronto stock exchange, the value of oil and gas deals was C$2.65 billion in the first half, the lowest since 2007, he added.

Iris Duan, a partner of MNP, a Canadian accounting and business consulting firm, said: "We are not sure if Chinese state-owned enterprises' acquisitions of Canadian oil and gas assets will slow as a result of restrictions by the Canadian government, but we expect there are many private companies rushing to acquire oil and gas assets in Canada."

State firms accounted for the majority of Chinese oil and gas investments in Canada, said Chan. Since 2007, Chinese state enterprises have bought C$119 billion of Canadian oil and gas assets.

Since 2011, Chinese oil majors had invested C$27 billion in energy companies in the Canadian province of Alberta, said Gary Mar, the Alberta representative in Asia.

Canada had the world's third-largest crude oil reserves behind Venezuela and Saudi Arabia, which had the biggest, said Mar. The country was the third-largest natural gas producer and the sixth-largest oil producer in the world, he added.

"There is still Chinese interest in Canadian oil and gas [assets], but they are looking at the regulations. From our point of view, we want that investment," said Mar.