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.
OTTAWA and BEIJING and TORONTO — CNOOC Ltd. has committed to spend an additional $5-billion to $8-billion on oil and gas development in North America as part of its deal with Ottawa to acquire Calgary-based Nexen Inc., but the promise is elastic in terms of the time frame and subject to continued high oil prices.
The company will also report annually – though confidentially – to Industry Canada on how it’s meeting its Investment Canada undertakings, Xu Xiaojie, an academic who also advised both CNOOC and China’s state council on the deal, said in an interview Tuesday.
CNOOC’s capital spending is expected to be in addition to the roughly $3-billion a year that Nexen has spent developing its oil and gas properties in recent years.
Under confidentiality provisions of the Investment Canada Act, the federal government cannot comment on the undertakings made by CNOOC in winning approval for its Nexen acquisition – nor on the commitments made by Malaysia’s Petronas in exchange for a federal green light on its $6-billion takeover of Calgary’s Progress Energy Resources Corp.
The uncertainty surrounding the promised CNOOC spending underscores the difficulty facing Ottawa in ensuring foreign takeovers bring clear and lasting added benefits to Canada.
Over the four months since CNOOC announced its deal, Ottawa negotiated additional investment undertakings from the company, but sources close to the deal say CNOOC was unwilling to commit to a firm time frame on the spending, insisting it needs flexibility to ensure all spending is done on a commercial basis.
CNOOC released a list of commitments on the weekend but did not include the capital spending promises. The commitments include a listing on the TSX for CNOOC Ltd.; an effort to retain Nexen’s management and employees; and commitments to support oil sands research and social and community projects now backed by Nexen.
CNOOC has also promised to make Calgary its new headquarters for North and Central America, incorporating Nexen’s Canadian and American operations and CNOOC’s own $8-billion worth of assets in the hemisphere. While details remain unclear, the Chinese company’s additional spending commitments would likely be earmarked for that region, but the undertaking has no time frame attached to it and provides flexibility if commodity prices take a nose dive.
Nexen has assets around the world, including the Long Lake project in the oil sands and acreage in B.C.’s Horn River unconventional gas play, as well as projects in the North Sea, Gulf of Mexico and Yemen. Long Lake has been a particularly troublesome project, with production well below the 70,000 barrels per day that was expected.
For the rest of this column, please go to the Globe and Mail website: http://www.theglobeandmail.com/report-on-business/international-business/asian-pacific-business/cnooc-promises-billions-in-new-spending—if-oil-prices-stay-high/article6280321/%3bjsessionid=D2NYQJwD9Y3rQs7x83P2FClLgmZsPdfqnQGGVpJKV9YpH321Ng0X!-1173911843/?ord=1