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Jim Prentice, the former Calgary MP who who served in the Harper cabinet as minister of industry and later as minister of environment and is now an executive at CIBC, addressed a conference in London on foreign investment in the oilsands, and the proposed $15 billion purchase of Nexen Inc. by China’s state-owned China National Offshore Oil Corp. The text follows.
The theme of our conference is, of course, Energy Strategies for Turbulent Times. These are indeed turbulent times and no one is unaffected, even Canada. In that context, I have been asked to speak today on the subject of foreign investment in Canada – in particular as it pertains to oil and gas. This topic is demanding, controversial, relevant to investors and, of late, the source of vigorous public and media debate in Canada.
This controversy has been building for years and it achieved a force in recent months that can fairly said to be “turbulence”. This is because of two proposed investments in Canadian energy companies by two State Owned Enterprises – Petronas from Malaysia, and CNOOC from China.
This is a pivotal time for the Canadian government. It must consider its policy on foreign investment in light of the growing and evolving role of SOEs in Canada’s oil and gas industry and across its economy, and in the face of changing geopolitical realities.
The focus right now, both inside government and among commentators and observers, is the proposed $15 billion acquisition of Canada’s Nexen Inc. by CNOOC. This is where Canada will begin to decide how to treat foreign investments proposed by State Owned Enterprises. This is where a new way forward will be defined.
The decision on Nexen will almost certainly be adjudicated under the “net benefit test” in the Investment Canada Act and under the Guideline on State Owned Enterprises, which I myself published in 2008 as Canada’s Minister of Industry.
This controversy over SOEs has surprised many in the Canadian and international business communities. But all along there was obvious and escalating public concerns in Canada about SOE investments and the blithe assumptions that ‘net benefits to shareholders’ necessarily equate to a ‘net benefit to Canada’.
So, what happens from here?
The short answer is: we don’t know. Even the timing of the government’s final pronouncement on the deal is a matter of speculation.
But the longer answer is that there are a number of assumptions that can be made by those with an understanding of the Canadian government’s perspective and priorities.
Here are three clear guideposts for what can be expected in the days ahead.
First, Canada must and will remain open for business – and that means open to foreign investment. Even a cursory review of Canadian history illustrates that the genius of Canada, as a massive country with a small population, has been its ability to attract foreign capital to help develop the country’s resources.
Canadians have done this with an enthusiasm that has allowed us to build one of the world’s highest standards of living, outpacing the economic growth rates of virtually all other western democracies over the past several generations. If you listen to the OECD, we’re on pace to continue to do so for the next 50 years.
This foreign investment has been recruited from every corner of the globe and has taken the form of private capital as well as the capital of both Sovereign Wealth Funds and State-Owned Enterprises, from both democratic and non-democratic countries.
In my view, none of this will change anytime soon.
For the rest of this article, please go to the National Post website: http://fullcomment.nationalpost.com/2012/11/15/jim-prentice-oilsands-will-be-a-definining-showdown-in-battle-between-forms-of-capitalism/