Canada clears deals by CNOOC, PETRONAS for local energy firms

08 December 2012 00:10  [Source: ICIS news]

TORONTO (ICIS)--Canada’s government on Friday approved planned acquisitions by Chinese and Malaysian state-controlled energy enterprises for Canadian energy companies.

China National Offshore Oil Corp (CNOOC) was cleared to acquire Canadian energy and oil sands firm Nexen in a deal valued at more than Canadian dollar (C$) 15bn ($15bn). Malaysia’s PETRONAS got approved to acquire natural gas firm Progress Energy in a deal worth more than C$5bn.

However, in a media briefing, Prime Minister Stephen Harper said Canada would be cautious in approving future large deals in the Canadian oil sands industry by state-controlled foreign firms.

For such deals to be approved, the government needs to determine that they will be of a net benefit to Canada.

Investments by foreign state-owned enterprises to acquire control of a Canadian oil sands business will, going forward, be found to be of a net benefit to Canada on an exceptional basis only, Harper said.

The oil sands are currently controlled by only about 15 firms, prompting government concerns that a series of large-scale deals by foreign state-owned companies could quickly transform the sector from a free-market industry into a sector that is effectively under the control of a foreign government, he said.

“To be frank, Canadians have not spent years reducing the ownership of sectors of the economy by our own government, only to see them bought by foreign governments instead,” he said.

Canada remains open for business and wants to attract investments to develop the oil sands and other industries, but "Canada is not for sale to foreign governments", he added.

The approval of the two deals contrasts with Canada’s rejection in 2010 of a bid by Anglo-Australian private-sector mining major BHP for Canadian fertilizer major PotashCorp. However, Harper said that the CNOOC and PETRONAS deals were approved under existing regulations and should not be seen as retroactive applications of changes to rules.

In separate statements, Canada’s industry ministry said that both CNOOC and PETRONAS made significant commitments to Canada in the areas of governance, transparency and disclosure, commercial orientation, and employment and capital investments – thus demonstrating a long-term commitment to the development of the Canadian economy.

The ministry will review the companies' compliance with those commitments every year, it said.

The ministry added that under revised rules of the relevant legislation, the Investment Canada Act, the government will be progressively increasing the review threshold to C$1bn for deals not involving foreign governments. For deals involving foreign state-owned enterprises, the review threshold will remain at C$330m.

($1.00 = C$0.99)

By: Stefan Baumgarten
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