Heated debate from government, business, union leaders to Nexen takeover news

Federal government to review deal

The proposed takeover of Calgary petroleum producer Nexen Inc. by a Chinese state-owned oil company sparked a fiery debate Monday, with the Alberta government welcoming foreign investment as opposition parties, unions and some business leaders urged caution.

Federal Industry Minister Christian Paradis announced Monday that Ottawa will review the China National Offshore Oil Corp.'s (CNOOC) $15-billion bid for Nexen under the Investment Canada Act.

The federal minister will have the final say on whether the takeover goes through, based on if it's deemed a net benefit to Canada.

Although the provincial government has no formal say in the matter, Energy Minister Ken Hughes said the news is further evidence of the importance of Alberta's oilsands in meeting global energy demand.

"Foreign investment benefits Albertans, and Canadians, putting Canadian firms in a better position to compete globally," Hughes said.

"The investment required to develop oilsands resources is significant . . . The result is jobs for Canadians here and abroad, and competitive products on an international market."

The Nexen takeover is not the first Chinese state-owned enterprise foray into Canada, but it's by far the biggest. The $15.1-billion agreement is equal to the amount Chinese firms have invested in Canada's oil and gas industry over the last three years.

The sheer size of the takeover will put Prime Minister Stephen Harper and the premiers to the test, forcing them to decide how to handle the future of the oilpatch, said University of Calgary economist Jack Mintz.

"It's going to be fascinating," Mintz said in an interview.

Debate over the Nexen deal began immediately after the news was announced Monday. Federal NDP energy critic Peter Julian said the Harper government needs to better define the criteria for a foreign sale, and the Nexen takeover should be subject to a transparent review - not decided behind closed doors.

Liberal industry critic Geoff Regan said in assessing the "blockbuster" deal, the Harper government needs to determine whether Canadian companies will be given reciprocal leeway to make major investments in China - and whether the state-owned company will act according to free market principles.

In Alberta, Liberal MLA Kent Hehr said the proposed sale should provoke questions about whether Albertans are losing control of their own resources.

And Alberta Federation of Labour president Gil McGowan said Canadians shouldn't let a company like Calgary-based Nexen, with a major stake in the oilsands, fall into the control of a foreign government without serious reflection.

"They'll keep the best jobs for themselves. They'll do the minimum to protect the environment and ignore Canada's long-term energy needs in favour of their own nation's needs," McGowan said.

But Gordon Houlden, director of the University of Alberta's China Institute, said given the size of the Chinese economy, it would be strange if the Asian powerhouse wasn't investing in Canadian energy companies.

He noted China is still a smaller player than Europe and the U.S. in Canada's oilpatch, but the U.S. will quickly realize it has a robust competitor north of the border.

The Nexen deal is likely to draw comparisons with CNOOC's $18.5-billion bid for U.S. energy giant Unocal in 2005, a tender ultimately beaten down by political opposition on Capitol Hill.

In Canada, the Harper government blocked Australian miner BHP Billiton Ltd.'s hostile bid in 2010 for Potash Corp. of Saskatchewan after political and business leaders lobbied against it.

Dick Haskayne, one of those business leaders, said the onus is on Nexen and CNOOC to prove this latest deal is a net benefit to Canada.

Haskayne, one of Calgary's most prominent energy executives, said Ottawa's decision needs to be shaped by the fact a number of energy companies hammered by the global economic slowdown and low natural gas prices are also ripe for a takeover.

"It's going to be a critical decision," Haskayne said. "It's not just Nexen. If Nexen is approved, you know the other ones that are in the same league."

Haskayne said he doesn't know all the pros and cons of the deal, but one of his key concerns is whether a pledge to keep a head office in Calgary is met.

But businessman Jim Gray, who also opposed the Potash Corp. sale, said it's a good thing Canada is building a closer relationship with the country poised to become the world's largest economy.

The chairman of the energy group of Brookfield Asset Management said he was concerned about Potash Corp. falling into the hands of a foreign entity because the Saskatchewan company controls one-fifth of the global resource.

Control of the oilsands isn't as concentrated, Gray noted. While Nexen is a major Canadian company, much of its assets are located outside the country.

"There's no parallel between those two deals," he said.

Recent Chinese investments in Alberta

- July 23: Calgary-based Nexen Inc. agrees to a friendly $15-billion takeover bid by CNOOC, China's largest offshore oil producer. Separately, Talisman Energy agrees to sell a 49-per-cent interest in its UK division to Sinopec Corp. for $1.5 billion.

- January: Calgary-based Athabasca Oil Sands Corp. announces it is selling its remaining 40 per cent of the MacKay River project in northern Alberta to PetroChina for $680 million. PetroChina becomes the first Chinese-state-owned company to wholly own a Canadian oilsands project.

- December 2011: Sinopec Group spends $2.2 billion acquiring Calgary oil and gas explorer Daylight Energy Ltd.

- November 2011: CNOOC buys Calgary oilsands developer Opti Canada Inc. for $2.1 billion US.

- May 2010: China Investment Corp. injects $1.25 billion into Penn West Energy to develop the trust's oilsands assets in the Peace River region.

- April 2010: Sinopec purchases ConocoPhillips' nine per cent stake in Syncrude for $4.65 billion.

- August 2009: PetroChina buys a 60-per-cent share in Athabasca Oil Sands' MacKay River and Dover projects for $1.9 billion.

- April 2005: CNOOC Ltd. pays $122 million for 16.7 per cent in MEG Energy Ltd. for a northern Alberta oilsands project.

The Edmonton Journal, July 24 2012
Byline: Kelly Cryderman, Calgary Herald
With files from The Canadian Press

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