CNOOC and Petronas takeovers approved, but future deals face new restrictions – by James Munson ( – December 7, 2012)

The federal government is severely limiting any future investment by foreign state-owned enterprises in the Canadian energy sector despite approving two long-awaited takeovers Friday evening.

The Chinese National Offshore Oil Corporation, better known as CNOOC, will be allowed to buy Calgary-based Nexen after agreeing to a strict set of requirements demanded by Ottawa exclusively by this bid.

CNOOC, which offered to buy Nexen for $15.1 billion, will have to keep certain parts of its operations in Canada and agree to rules on employing Canadian.

The Chinese oil giant will swear to work by “free market principles” as well as file an annual compliance report to Industry Canada, the department responsible for handling foreign takeovers.

“Under existing guidelines, (CNOOC’s) proposed transaction to acquire control of Nexen is likely to be of net benefit to Canada,” said Industry Minister Christian Paradis in a statement issued Friday.

Petronas Carigali Canada Ltd, another petroleum behemoth but this time owned by the Malaysian government, will also be able to follow through on its purchase of Progress Energy Resources Corp, Paradis stated Friday.

Petronas has to agree to conditions similar to CNOOC’s – they include rules around governance, transparency and commercial orientation – but they will not have to file a report every year like the Chinese company.

Petronas’ proposed deal did not raise as much political opposition as CNOOC’s in the past few months since both companies made their proposals.

Progress owns natural assets in Western Canada rather than the more strategic oilsands projects as well as international oil plays under Nexen’s control.

In announcing the decision, Prime Minister Stephen Harper emphasized the strict new rules, saying that, having sought to remove government control over the oilsands, the Conservatives would not allow government control to be re-introduced through the controlling interests of state owned enterprises.

NDP resources critic Peter Julian was quick to react, chiding the government’s handling of the file.

“This has been churning through for months and this has been a badly botched file, we’ve seen complete confusion fro m this government, and today they’re trying to sugar coat something that I think will be a rather bitter pill for Canadians,” Julian said.

It’s not clear what these rules will mean in detail, but some reports have suggested that CNOOC will have to keep its North American headquarters in Calgary.

But despite the approvals, Ottawa put the brakes on any future investment by SOEs in Canada’s energy sector with new rules for any future bids.

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