Note to foreign firms: We’ll take your cash, but keep your promises – by Eric Reguly (Globe and Mail – December 10, 2012)

Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

The Harper government has now agreed that a chunk of Canada’s oil and gas sector can be controlled by state-owned companies from afar. China’s CNOOC will get its prize in Nexen; Malaysia’s Petronas will be allowed to own Progress Energy Resources.

But that’s it. After the deals are done, state-owned enterprises, or SOEs, will be allowed to buy oil sands companies only under exceptional circumstances.

Is that fair? The issue should not be whether to allow foreign ownership, but whether that ownership comes with iron-clad commitments.

At this point, we don’t know, because Ottawa has not disclosed the commitments made by CNOOC in its $15.1-billion (U.S.) deal and Petronas in its $6-billion (Canadian) acquisition.

But one hopes the government has learned the lessons of the past because, so far, most foreign takeovers have come up shamefully short on assuring a “net benefit” to Canada. That’s as much the government’s fault as that of the foreign buyers.

Had the government embarked on a nationalistic campaign before Friday, both the Chinese and the Malaysian bids would have been turfed into the Pacific. CNOOC, which now wins a diversified energy company whose assets range from Alberta oil sands to conventional oil off the West Africa coast, is controlled by the Chinese state.

Its website describes China National Offshore Oil Corp. as “a mega government-owned company operating directly under the State-owned Assets Supervision and Administration Commission.”

CNOOC is takeover-proof. So is Petronas, the state-owned company that bid for Progress, a Canadian natural gas player. Should they have been allowed to buy Canadian companies that cannot buy them? (In 2005, CNOOC was given the bum’s rush out of the United States when it had the temerity to bid for Californian oil giant Unocal).

A No answer would have seemed fair. But it would also have been hypocritical: If there is one Western country that has protected, and still protects, large parts of the industrial and services economy, it is Canada.

For large parts of their lives, Air Canada, Canadian National Railway, Petro-Canada and Atomic Energy of Canada Ltd. were Crown corporations, meaning they were wholly immune from takeovers, even from domestic bidders. At one point, there was a cap on the foreign-ownership percentage of the Canadian oil and gas industry. Most of the big Crown corporations have been privatized or sold to industry players in the past decade or two. (Last year, AECL’s nuclear reactor division went to SNC-Lavalin).

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