Canada govt now more likely to reject CNOOC's bid of Nexen - Fitch

23 October 2012 05:23  [Source: ICIS news]

SINGAPORE (ICIS)--Canada’s decision to block the takeover of Progress Energy by Malaysia's PETRONAS increases the likelihood that it will also reject China National Offshore Oil Corp’s (CNOOC) bid to acquire oil major Nexen, Fitch Ratings said on Tuesday.

Industry minister Christian Paradis sent a notice to PETRONAS late in the previous week, advising the Malaysian major that at this time he is not satisfied that the deal – valued at more than $5bn (€3.9bn) – would be of “net benefit to Canada”.

The possible reasons for the Canadian government to reject PETRONAS’ bid includes its desire to ensure that sufficient control and profits remain in Canada, as well as guaranteeing local jobs, according to Fitch Ratings.

“This is in line with the current global wave of "soft" resource nationalism, in which governments are opting to gain a greater share of resource company profits through changing regulation, taxation and contractual terms,” it said.

“This decision increases the likelihood that the Canadian government will also reject China's CNOOC’s bid to acquire 100% of Nexen,” it added.

Earlier this month, Paradis extended his review of the planned $15.1bn takeover of Canadian oil major Nexen by China’s state-controlled CNOOC.

The deal with Progress would have provided PETRONAS with an opportunity to enlarge its reserves, diversify its product range, and potentially begin liquefied natural gas (LNG) exports from North America to Asia, according to Fitch Ratings.

“Tapping higher-priced and strong LNG demand from Asian utilities would be a strategic alternative for Progress away from its traditional outlet of the North American pipeline gas market,” it added.

($1 = €0.77)

By: Nurluqman Suratman

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