Oil and Gas Sector-Politics and Image

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

The proposed takeover of Nexen Inc. by China National Offshore Oil Company, or any other like it, cannot be allowed. If the acquisition of Canada’s resource companies is not banned, then much of Calgary’s skyline will be snapped up by the world’s gigantic state-owned enterprises.
 
Resource companies are as important as banks or the stock exchange. The same ownership ring fence must be drawn around them, or a limit of 10% foreign ownership imposed. If that policy had not been adopted years ago by Ottawa, Toronto’s skyline would be very different.
 
The reality is that Canada is a small economy that must be protected, from potash to the TMX, from the foreign governments that have more money than Ottawa and bankroll enterprises and investment portfolios.

The new Game of Thrones is not about military conquest but about picking off trophy assets from countries, like Canada, that are Boy Scouts and naïve enough to let them do so. And growing and nurturing large successful entities is essential to any nation-state. Size matters.

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

State oil companies operating abroad are becoming more and more akin to independent corporations driven by market forces
 
In Halifax Friday, B.C. premier Christy Clark walked out of the premiers’ conference over the Northern Gateway pipeline that supposedly will take Canadian oil to China. “It’s not a national energy strategy if I don’t sign on,” Ms. Clark said.
 
She continued: “Until we see some progress in discussions between British Columbia, Alberta and the federal government with respect to the Gateway pipeline through British Columbia, we will not be participating in the discussion of a national energy strategy.”

Sounds brave and nationally divisive, but in the end Ms. Clark may be left holding a dead cat. A year or two from now, the story is likely to be that nobody needs Northern Gateway, mainly because the Chinese companies that own some of Canada’s oil would rather sell oil to the United States than ship it through the Rockies to China.
 
That seems more than plausible. We appear to be entering a new era of high political melodrama over China and national energy strategies. Canada vs. China, China vs. the United States, the U.S. vs. China, and so on around the world.

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

Encouraged by federal and provincial government overtures, Canada’s vague ‘net benefit’ test for foreign transactions and Canadians’ general indifference to the deluge of foreign deals in the oil patch, China’s state-controlled CNOOC Ltd. bid US$15.1-billion this week for Nexen Inc. with confidence it will get Ottawa’s green light.
 
China’s boldest step yet into Canada is drawing plenty of support from those who see it as just another foreign purchase in a country that is open for business, needs new markets in Asia for its oil and gas, needs the capital to develop its resources, wants to be friends with China and is itself a big investor abroad.
 
What’s missing is the big picture, and for Canada it’s not an encouraging one. Stand back and you’ll see that CNOOC’s purchase of Nexen is not just another foreign takeover and must not be viewed in isolation.

There’s big politics at play, and Canada has to be careful not to overplay its hand. Canada has been courting increased trade with the Chinese as part of Prime Minister Stephen Harper’s agenda to make Canada an energy superpower, while reducing its dependence on the volatile United States.

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

Part 2 of a two-part series on the prospects and challenges of exploring oil and gas in the greater Arctic region.
 
The greater Arctic region is one of the world’s last few unexplored energy frontiers: foreboding and risky but irresistible to world powers given its treasures beneath.
 
A combination of high oil prices, the global race for new discoveries and climate change has lured oil majors to dip their toes in the frigid waters in the hunt for the estimated 90 billion barrels of oil and 1,670 trillion cubic feet of natural gas, despite a backlash from environmentalists. 

While many fear the region’s rapid development will destroy its fragile and unique ecosystem forever, the Arctic has the potential to generate at least US$100-billion in oil and gas and mining investments within a few years, a Chatham House report says.

“There is a wide range of potential scenarios for the Arctic’s economic future, depending principally on local investment conditions and global commodity prices,” wrote Charles Emmerson, who co-authored the Chatham report and wrote The Future History of the Arctic. “Oil and gas, mining and the shipping industries will be the biggest drivers and beneficiaries of Arctic economic development.”

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The 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.

Roger Martin is dean of the University of Toronto’s Rotman School of Management.

The CNOOC takeover bid for Nexen demonstrates once again that while a given government policy tool may have a bright, sunny face, it often simultaneously casts a dark, problematic shadow.

The Canadian policy tool that will be used to determine whether this takeover will be permitted is “net benefit.” This means that after all the capital-market formalities are taken care of – which should be pretty straightforward due to the 61-per-cent premium being offered – the government will declare whether the takeover produces net benefit for Canada.

Thus far, the net benefit tool has been all happiness and light for Ottawa. The handy thing is that the government can make up any conclusion it wants under the as-you-like-it construct of net benefit. The prima facie evidence for making stuff up is the BHP Billiton bid for PotashCorp, where the government determined that the bid didn’t provide net benefit to Canada and disallowed the takeover. I suspect the government felt pretty chuffed about the power of the net benefit tool.

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The 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 Prentice is senior executive vice-president and vice-chair of CIBC, and a former industry minister.

A few months ago, The Economist magazine opined that the defining battle of the 21st century would not be between capitalism and socialism, but between different versions of capitalism – market capitalism on the one hand and state-owned enterprises (SOEs) on the other.

If that is so, the battleground has now shifted to Canada’s oil sands. To be clear, I do not have a horse in this race. I personally favoured a Canadian outcome for Nexen. Its assets lay in the shop window for months, arguably years, but no Canadian energy company emerged to buy them.

Instead, CNOOC, one of the world’s largest SOEs, has stepped forward with a blockbuster offer. This transaction represents the largest outbound Chinese deal to date and has been carefully insulated to provide commitments for Canadian investment, Canadian jobs, a Canadian hemispheric headquarters and a Canadian domiciled public listing.

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The 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.

LUNENBURG, N.S – British Columbia Premier Christy Clark opened another front in her demand for a “fair share” of benefits from the proposed Northern Gateway pipeline, calling on the Harper government to sit down at the negotiating table along with Alberta.

Ms. Clark laid out the new terms as Canada’s premiers met with aboriginal leaders in the historic fishing town of Lunenburg ahead of the annual Council of the Federation meetings, which begins Thursday in Halifax. “My basic request is for Alberta and Canada to come to the table and sit down and figure out how we can resolve this,” she told reporters after the meeting.

But the province’s push for a greater slice of oil-sands prosperity comes as the sector’s prospects dim. Suncor Energy Inc. is backing away from its plans to produce a million barrels of oil a day by 2020, amid growing concerns from investors about the profit outlook for the oil sands. The Calgary-based giant’s hesitation stands in contrast to a bold play by China’s state-controlled CNOOC, which this week proposed a $15-billion takeover of oil and gas producer Nexen Inc.

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The 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.

Jeff Rubin is an author and former chief economist of CIBC World Markets. His second book is The End of Growth.

CNOOC Ltd.’s blockbuster deal for Nexen Inc., if nothing else, is a stark indication of how far the goal posts have moved not only for Canada’s oil patch, but also for world oil demand.

Only four or five years ago, the notion that a state-owned Chinese company could buy–lock, stock and barrel of bitumen–one of Canada’s premier oil names was politically unthinkable. Any such deal was sure to be turned down by Ottawa under its Foreign Investment Review Act (not to mention the hue and cry that would come from Alberta’s provincial government).

Today, that’s all changed. CNOOC’s $15-billion offer for Nexen follows a number of major foreign transactions in Canada’s energy sector. Among others, Malaysian energy giant Petronas is paying $5.5-billion to get at Progress Energy’s natural gas reserves in British Columbia. Earlier this year, PetroChina Co. Ltd. completed a two-pronged deal for Athabasca Oil Sands Corp. that tallied $2.5-billion. In 2010, Sinopec paid $4.65-billion for a 9 per cent stake in Syncrude, which runs Alberta’s largest oilsands mine.

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

Canadian oil and gas markets are being rocked by a lot of news lately, whether it involves building pipelines in Canada or potential economic turmoil in Europe. The latest is Monday’s announcement that China National Offshore Oil Corp. will pay $15.1-billion in cash to take over Nexen at a 66% premium relative to the 20-day average stock price.
 
The immediate consequence is to make a lot of Nexen shareholders richer, since the share price shot up from $17.29 to $26.35.
 
The Nexen takeover also lit up the chattering political classes in Ottawa. The federal government will need to make a critical decision over whether to approve this takeover under the Investment Canada Act. In my view, the worst decision would be one based on poor economics and perceptions. The best decision would be a clear policy focused on “net benefits” when assessing takeovers of Canadian companies by foreign state-owned enterprises and sovereign wealth funds.
 
Certainly, the usual nationalists will be out in full force, pushing to block the takeover. My skin crawls with dubious concepts such as “strategic assets,” “national champions” and “hollowing out.”

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

As premiers gather in Halifax this week, the divide between Alberta, British Columbia and Saskatchewan over the spoils of energy development is growing. B.C. is demanding its fair share of benefits from oil pipelines cutting through the province and Saskatchewan has got to be nervous that Alberta’s oil sands production is going full tilt, pushing down prices for its conventional crude because there’s not enough pipeline space to move both.
 
All this makes talk of a national energy strategy, championed by Alberta and expected to be one of the main topics of discussion at the Council of the Federation meeting, naïve at best, explosive at worst. Given Canada’s bad experiences with central planning in energy, Alberta’s Premier, Alison Redford, and the strategy’s diverse cheerleaders, should have seen it coming.

The rift between Alberta and British Columbia over the proposed Northern Gateway pipeline cracked wide open this week and a quick fix is unlikely. In fact, it could be all downhill from here if the anti-Northern Gateway NDP gains power in the coming provincial election, as polls suggest.
 
“There is no way this pipeline is going to happen without B.C.’s approval,” Premier Christy Clark told CBC Radio from Halifax Tuesday.

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The 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.

Edmonton and Halifax — A standoff between premiers has left the proposed Northern Gateway pipeline in peril, with Alberta Premier Alison Redford saying she won’t share any resource revenue and B.C. premier Christy Clark saying she’ll block the project without more cash.

Speaking Tuesday morning at an annual pancake breakfast at the Alberta legislature, Ms. Redford rebuffed B.C.’s day-old demand that more money – an unspecified “fair share” – be included if it’s to support the proposed $6-billion pipeline, which would carry Alberta oil to the B.C. coast for shipment to Asia.

“We will not share royalties, and I’ve seen nothing else proposed, and would not be prepared to consider anything else at this point in time,” the Alberta premier said.

B.C. Premier Christy Clark said she was taken aback by the comments, and repeated that Northern Gateway won’t go through without a slice of royalties. “If Alberta is not willing to even sit down and talk, then it stops here,” Ms. Clark vowed.

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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.

Stephen Harper won’t stand in the way of Beijing’s biggest-ever foreign investment, a $15.5-billion (U.S.) bid unveiled Monday for Calgary-based oil producer Nexen Inc. by China’s state-owned Cnooc Ltd., or China National Offshore Oil Corp. Indeed, the Canadian prime minister will be applauding.
 
If Athabasca is rivalled only by the Middle East in its vast oil reserves, the world’s top creditor nation has its own vast resources — of cash — that Harper is eager to tap. Chinese firms already have pumped $17 billion into North American oil and gas plays since 2010. But there’s at least another $2 trillion of acquisition firepower where that came from.

The Cnooc embrace also puts muscle into Harper’s warnings to Washington that Canada is ready to redirect its oil exports to Asia if the U.S. balks at, say, the proposed Keystone XL pipeline that Calgary’s TransCanada Corp. proposes to build across the length of the U.S.

U.S. President Barack Obama has crossed swords with Ottawa with his one-year moratorium on the Keystone XL megaproject. That delay prompted Harper to turn up the volume on his kind words for China.

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The 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.

Welcome to the future. Chances are you’d never heard of Nexen or CNOOC before yesterday. But the $15.1-billion proposed takeover of Nexen by a huge state-owned Chinese oil company shows the way the world is going. We are seeing major new alliances that would have been unthinkable just a decade ago.

The deal has yet to be approved by Ottawa. But it plays right into Stephen Harper’s strategy of maximizing our opportunities as a global petro-power. Canada needs the Chinese and they need us, and it looks like everyone will wind up a winner – everyone, that is, but the large army of doomsayers who think the energy boom is stealing our soul.

Nexen has huge ambitions, but it’s a global pipsqueak. Like the industry as a whole, it needs enormous infusions of capital to realize its potential. The Chinese have huge amounts of money to invest in energy development and they’re scouring the world for opportunities. Their time horizon is very long. Canada is safe and secure – and also technologically advanced. For them, this is a no-brainer.

CNOOC is not the Politburo dressed up in pinstripes. It’s listed on the New York Stock Exchange.

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The 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.

China is taking a historic step toward its ambition to become a global resources powerhouse with a $15.1-billion (U.S.) bid to buy Calgary-based oil producer Nexen Inc.

The bid by state-backed CNOOC Ltd. is the largest by a Chinese firm for a foreign company, and confirms that Canada has become a proving ground for China’s rise in the global economic order as it deploys some of its trillions of dollars in foreign reserves to secure strategic resource properties around the world.

The deal builds on a string of previous acquisitions by Chinese firms in Canada’s oil sands. It would be the second-largest deal ever in Canada’s energy sector and, if approved, the sixth-largest takeover ever in Canada. Though it may test the Harper government’s stance on foreign ownership, two years after it blocked a $39-billion (Canadian) takeover offer for Potash Corp. of Saskatchewan Inc., there are strong indications that the deal will be approved.

For one, CNOOC, China’s third-largest oil company, has cultivated relationships with top players in Ottawa in recent years.

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

Prime Minister Stephen Harper has been telling China that Canada welcomes its investment. Yet CNOOC Ltd.’s bid to purchase Canadian oil major Nexen Inc. for US$15.1-billion ($15.4-billion) pushes his government to a fork in the road, and its choices will have major implications for the country.
 
If Ottawa approves the bid, it makes good on its rhetoric and fends off the bad odour from its rejection of Australian miner BHP Billiton Ltd.’s hostile $39-billion bid for Potash Corp. nearly two years ago. However, make no mistake, it will make it hard to reject the takeover of other Canadian oil and gas ‘champions’ with depressed share prices that since the BHP/Potash saga have been seen as off limits, such as Encana Corp., Talisman Energy Inc. and Canadian Oil Sands Ltd., leaving Canadians with even less ownership and less control of an industry that is supposed to be the engine of their economy.
 
If Ottawa rejects the bid, it contains the selloff but loses credibility with investors and offends China, which Canada needs as a market for its oil and gas to reduce its dependence on the United States.

With CNOOC’s offer, China seems to be cleverly accommodating and even exceeding Canada’s foreign investment requirements, leaving little room for Ottawa to say no. Indeed, in interviews yesterday, CNOOC’s top executives said they are confident the deal will meet the “net benefit” test under the Investment Canada Act, even if formal discussions with Ottawa have not yet started.

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