Prime Minister Stephen Harper promises to clarify rules after Petronas decision – by Andrew Livingston (Toronto Star – October 23, 2012)

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

Prime Minister Stephen Harper says he’ll use a pending decision on a major Chinese investment in Canada’s oil patch to clarify which foreign investments meet the test of being in the Canadian interest.

Renewed urgency over foreign investment came over the weekend when Ottawa rejected a $5.9-billion bid by Malaysian state oil company Petronas for Calgary-based Progress Energy Resources Corp. The ruling left the acquisition up in the air and sent shock waves through Canada’s energy sector.

“We will give greater clarity on our policy framework going forward when we take a couple of decisions that are before us,” Harper promised at a press conference Monday.

Fallout from the rejection of the bid for Progress hit the Toronto stock market early Monday amid speculation Canada is closed to foreign investment. With that speculation comes serious concerns over Beijing-based CNOOC Ltd.’s proposed $15.1-billion takeover of Nexen Inc., which is being reviewed by the Harper government.

“The odds of the proposed acquisition by CNOOC getting approval have fallen,” Philip Skolnick, an analyst at Canaccord Genuity Corp. in New York, told Bloomberg. “We now give the deal over a 50 per cent chance of closing versus our previous ‘high probability it closes’ view, with risk to the offering price.”

A decision on CNOOC’s bid is expected later this fall and has already become a lightning rod for political concern over foreign government-controlled firms gaining control of Canadian natural resources.

The outcome of the decision has enormous implications for energy development in Canada, the Conservative government’s trade-based economic strategies and future relations with Beijing.

The deadline for a decision on the proposed Nexen buyout is Nov. 11, although it can be extended in 30-day stages.

Nexen shares dropped 4.4 per cent Monday, below CNOOC’s $27.50 offer price. Progress Energy shares fell 9.28 to $19.64, well below the $22 per share offered by Petronas.

Unsatisfied with Petronas’ bid for Calgary-based Progress Energy, Industry Minister Christian Paradis rejected the bid minutes before a midnight review deadline last Friday. Analysts at CIBC World Markets gave 25 per cent odds on the deal being saved — Petronas has 30 days to amend its deal and get it to Ottawa for another review — and said there’s a 50 per cent chance another multinational oil company comes along if the Petronas deal fails.

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