Stephen Harper finds oil deals with Chinese state enterprises a hard sell

PUBLISHED : Saturday, 03 May, 2014, 5:16am
UPDATED : Saturday, 03 May, 2014, 7:19am

One of the major deliverables of Stephen Harper's February 2012 visit to China was a Foreign Investment Promotion and Protection Agreement.

It was a pact hailed by Harper after a meeting with Premier Wen Jiabao in Beijing and was close to being a done deal.

At the same time, Natural Resources Minister Joe Oliver and energy industry bosses were meeting Wang Yilin, chairman of the China National Offshore Oil Corporation (CNOOC).

Seven months earlier, CNOOC had purchased Opti Canada, a failed petroleum producer with a minority stake in an oil sands project in Long Lake, Alberta. In the previous seven years, Chinese state-owned enterprises such as PetroChina and China Petrochemical had put US$11 billion into minority positions in oil sands projects. CNOOC decided the time had arrived for a bold stroke.

On July 23, 2012, five months after the Harper visit, the company launched a massive US$15.1 billion offer for Nexen.

The Conservative political base recoiled at the prospect of Canadian resources falling into the hands of Chinese state enterprises and Harper's old doubts about China resurfaced.

The leading cabinet naysayer was Jason Kenney, tipped as a successor to Harper, who took it upon himself to investigate how CNOOC might be blocked, organising a meeting with investment bankers, corporate lawyers and oil industry chiefs. A consensus emerged that further incursions by Chinese state-owned enterprises would imperil Canadian control over the oil sands, jeopardising jobs in Calgary and technological leadership over unconventional oil recovery methods.

Harper held his nose and approved the deal, worried that to kill it would send the wrong message to other foreign investors.

But he made it plain that any future takeovers in the oil sands by state-owned enterprises would be approved only in very exceptional circumstances.

"To be blunt," he told a press conference televised live, "Canadians have not spent years reducing the ownership of sectors of the economy by our governments only to see them bought and controlled by foreign governments instead."

To date, more than two years after Guangzhou, the Foreign Investment Promotion and Protection Agreement remains unratified by the Harper government, something the University of Alberta's Wenran Jiang cites as an irritant to China.