Oil and Gas Sector-Politics and Image

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.

Prime Minister Stephen Harper’s decision – and it was his decision – about how to treat takeovers by state-owned companies will reverberate around the world.

Other countries – either the ones with state-owned enterprises (SOEs) or the ones with resources these SOEs wish to buy – won’t slavishly follow Mr. Harper’s lead. But some will take note of how an advanced industrial country handled this growing fact (or challenge) of world economics, as will countries with SOEs. The Canadian precedent – red-circling some industries against SOEs while toughening purchasing criteria in other industrial sectors – will be studied, if not copied.

The Canadian precedent is based on a fundamental premise: that SOEs don’t necessarily act the way shareholder-owned companies do. SOEs, such as those in China, contest that premise. They argue that, whatever the company’s controlling structure, SOEs act on market imperatives alone, up to and including listing their shares on stock markets.

It’s not easy generalizing about SOEs. It’s one thing to have an SOE from autocratic China, where the Communist Party and the military own big chunks of the economy, including interests in SOEs, and, say, Statoil of Norway, a profoundly democratic country that has wisely (unlike Alberta) husbanded its resource revenues in enterprises such as Statoil to make money for future generations.

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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.

CALGARY — For more than 70 days now, protesters have holed up in trees in Texas, trying to block construction of the southern leg of TransCanada Corp.’s Keystone XL pipeline. They have barricaded themselves inside long stretches of welded pipe, facing police mace in a bid to slow construction. They have locked themselves to equipment, and formed human chains. They have staged hunger strikes from jail cells.

“There’s a lot of resistance and animosity toward the project,” said Ron Seifert, who comes from Montana and is now a spokesman for Tar Sands Blockade, a group created earlier this year to co-ordinate civil disobedience. More than 40 people have been arrested. Tar Sands Blockade said half were Texan; TransCanada says all but one were out-of-state.

What’s happening deep in the U.S. South, however, is likely a precursor of what it is to come for other controversial pipelines. Texas is not a place that is generally opposed to oil. Yet protesters have converged on the state in hopes of interfering with construction of a project that has stoked an angry debate about the future of energy development.

If such conflict can happen in Texas, there is a strong likelihood it will happen again, and in greater force, in Nebraska – the state where opposition delayed a presidential permit for the Keystone XL pipeline – in British Columbia and other areas of North America where new pipelines are planned.

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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.

Charles Burton is an associate professor of political science at Brock University in St. Catharines, and is a former counsellor at the Canadian embassy in Beijing.

Prime Minister Stephen Harper has drawn remarkably little support from political commentators since he announced approval for the Chinese National Overseas Oil Corp. to buy Nexen Inc., but then banned any further sales of Canadian oilsands companies to state-owned firms, except in “exceptional circumstances.”

Responses to the two-part announcement have ranged from “baffling” to “incoherent” to even “an irresponsible farce.”

The federal government’s decision was a long time coming, and rightly so, as it will have enormous implications for Canada’s political economy for generations to come. China is undeniably an engine of future global prosperity, so a major policy decision like this — with far-reaching consequences for Canada’s economic relations with China — cannot be made lightly. Nor should it be based on partisan political considerations, because Canada’s national interest is very much at stake here.

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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 is catching flak from both sides of the political spectrum as Canadians ponder the implications of his decision to let Chinese and Malaysian state-owned companies buy $20 billion worth of our oilsands industry. On the left, New Democrats complain the Tories have recklessly “rubber-stamped” a deal with no great benefit to Canada. Critics on the right fret that Ottawa will scare off investment with its murkily “incoherent” policy on acquisitions.

There’s truth to both criticisms. The Conservatives haven’t yet articulated a credible energy strategy, for all their obsession with the sector. They are making it up as they go, in back rooms, without benefit of Parliamentary debate or public input, as the Star noted on this page on Saturday. In this case they tossed a sop to China and Malaysia, without getting much in return, then decreed the rest of the oilpatch off-limits to other similar actors.

In Parliament on Monday Harper struck a populist pose, positioning his Tories as careful stewards of the public interest, as against the Liberals, who in the past reflexively waved through foreign investment, and the New Democrats who reflexively opposed it. It was a clever, if disingenuous posture. In reality, after ragging the puck for two years, the Tories took the path of least resistance.

At the end of the day Canadians are still left looking for a coherent energy strategy. The Tories have yet to enunciate a credible plan to develop the oilsands in a sustainable manner, and to address climate change.

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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.

If cabinet ministers from Canada’s big oil producing provinces are worried by the federal government’s new limits on foreign investment in the oilsands, they’re not showing it.

And a spokesman for Canada’s oil producers said the new policy provides some welcome clarity for the sector.

They all chimed in after federal natural resources Minister Joe Oliver told an industry meeting in Toronto there is still “plenty” of private sector money for the oilsands.

Last week, the federal government had slapped limits on how much foreign state-owned companies can invest, especially in oilsands projects. But it approved takeovers of Nexen Inc. by China’s state-owned firm CNOOC. It also allowed the takeover of Progress Energy Resources Corp. by Petronas of Malaysia.

After a speech to the Canadian Association of Petroleum Producers (CAPP), Oliver said the new rules won’t hurt the oilsands, as there is a “huge amount of capital available globally and quite a bit available inside our country.”

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The National Post is Canada’s second largest national paper.

See, the thing about Solomon is, he never actually cut the baby in half.

Nevertheless, the prime minister’s split decision on foreign takeovers is being praised as Solomonic in some circles. But then, for some people cutting the baby in half — you can have the head and one of the shoulders, but the rest of it you get only in exceptional circumstances — is always the right decision. Because, you see, it’s a compromise, and compromise shows maturity, and maturity is the beginning of wisdom, and, well, it’s a compromise. God forbid he’d decided it on principle.

Aside from the baby-severing community, however, the reaction was, as you might expect, mixed. Perhaps the most memorable was Tom Mulcair’s devastating putdown, that the only clear winners from Harper’s decision to allow the sale of Calgary-based Nexen to China’s state-owned CNOOC were the “Nexen shareholders” — oh, them — in “Mr. Harper’s oilpatch.”

I wasn’t aware until now that it was Mr. Harper’s oilpatch. Still, you could make a case that, as of Monday, it is. The prime minister may not have gone so far as to dismiss Nexen’s shareholders, à la Mulcair, as some sort of bit players in the whole drama, but current and prospective owners of other oilsands firms should be on notice: they no longer truly belong to you. They are, at least in part, Stephen Harper’s.

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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.

TORONTO and OTTAWA and CALGARY — Alberta issued a chilly response to Ottawa’s new foreign investment rules, with senior ministers concerned that investment in the oil sands will slow now that wealthy state-controlled energy firms are essentially off-limits for more takeovers in the province.

Alberta Energy Minister Ken Hughes said the new rules may reduce foreign investment and drive up the cost of capital for companies developing projects.

“There is the potential now for less investment going into the oil sands,” Mr. Hughes told a conference in Calgary. The minister said he worries that Alberta is already a high-cost jurisdiction for producing crude, and the possible increase in financing costs could reduce the competitiveness of the oil sands.

Share prices of Canadian energy companies were largely stable Monday, in the wake of the government’s late-Friday announcement that greatly restricts the ability of foreign state-owned enterprises to acquire Canadian energy firms. Indeed, chief executives from some of Canada’s largest energy companies applauded the federal government’s new policies, arguing that companies will find other ways to accomplish their financing and development needs.

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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.

A Calgary billionaire. A quartet of policy gurus. An Alberta academic. Groups of oil-patch executives. And behind them all, a Prime Minister who for months took a deep personal interest in a decision that stands to shape Canada’s economy for years to come.

When Stephen Harper told Canadians how he intends to re-draw the rules around investment by foreign state-owned companies, his words were, in many cases, borrowed. They were culled from a select group whose insights were given great weight by a Prime Minister who was engaged with the problem even before a pair of oil-patch deals forced the pace.

The Harper government pledged more clarity on foreign investment guidelines two years ago, when it turned down BHP Billiton Ltd.’s takeover of Potash Corp. of Saskatchewan Ltd. It is unclear how much of that new policy had been devised by last July, when China’s state-controlled CNOOC Ltd. launched a $15.1-billion bid for Nexen Inc., following what would be a $6-billion bid for Progress Energy Resources Corp. by Malaysia’s Petronas. By then, sources say, the Prime Minister was already taking a personal interest.

The two takeover bids set in motion a federal drama that would feature missed deadlines, an overturned deal that was subsequently revived and a government warring internally as it sought to establish a response.

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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.

Jim Stanford is an economist with the Canadian Auto Workers union.

A common undercurrent in debates over foreign ownership is the near-universal assumption that Canada “needs” foreign capital to develop its vast energy resources. Friday’s Globe and Mail, for example, quoted an Alberta professor who put it unequivocally: “There’s no doubt we need capital to develop our resources, and the biggest single available pool is in China.” If the analysis starts with that assumption, then it’s no wonder policy-makers will bend over backward to attract this essential, precious substance called “capital,” as witnessed by Ottawa’s approval of two takeovers by state-owned foreign firms.

In popular discourse, capital is a synonym for “money.” In economics, however, it means something more specific: It’s production saved from current output, to be reinvested in the expansion of future output. Corn seed that’s saved and replanted next year, rather than being eaten this year, is the simplest example.

To qualify as capital in this sense, the value in question must be produced but not consumed, then used to produce something else. Complementing the tangible product that’s actually reinvested (physical capital), we also need the know-how (“human capital”) to use ever-more-sophisticated capital goods to enhance future production.

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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.

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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.

CALGARY and VANCOUVER — Ottawa’s new takeover rules, which enshrine the government’s desire to keep other states from controlling a resource that has made Canada a magnet for foreign money, have been met with approval by Canadian energy executives, many of whom feared a harsher policy that would severely constrain investment.

The rules all but forbid further takeovers of Canadian oil sands companies by state-controlled enterprises. But they still give substantial room for foreign capital to come in, leaving the door wide open to minority investments and joint venture partnerships.

Across the great expanse of Canada’s resources sector – from Bay Street to companies extracting oil near Fort McMurray, to mines spread across the Canadian Shield – the new rules were met with praise.

The government announced the guidelines as it gave its blessing to two controversial deals – CNOOC Ltd.’s $15.1-billion (U.S.) takeover of Nexen Inc. and the $6-billion (Canadian) purchase by Malaysia’s Petronas of Progress Energy Resources Corp.

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http://www.ipolitics.ca/

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.

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