Oilpatch seeks takeover clarity
Ottawa asked to reveal terms of Progress, Nexen deals
Concerns and questions are emerging from the heart of the oilpatch over the federal government’s new foreign investment framework, with some business groups and the Alberta government seeking greater clarity around the updated rules and what they mean to future transactions.
The Conservatives are also facing mounting criticism from opposition parties that are demanding the government release the terms and conditions applied to the CNOOC takeover of Calgarybased Nexen and the Petronas acquisition of Progress Energy Resources.
The Harper government, however, maintains it must reserve discretion on determining what investments are of “net benefit” to Canada — especially when it comes to acquisitions by state-owned enterprises — and won’t commit to releasing what conditions were attached to the takeovers.
“We have given clarity, the kind of clarity that private investors need,” Prime Minister Stephen Harper said Monday in the House of Commons.
“At the same time, we have reserved discretion and we need discretion to make sure when we’re dealing with foreign governments that this government has the capacity to protect the best interests of this country and its citizens,” Harper said.
Pressed by the opposition on whether terms or conditions of the takeovers will be made public, the prime minister said the details will only be released “when it is proper to do that, and not, of course, in circumstances where it involves confidential commercial information.”
But as the Tories came under attack Monday in the Commons over the investment guidelines, a leading business group in Harper’s hometown of Calgary said greater clarity, transparency and reciprocity is needed when it comes to the Investment Canada Act.
The Calgary Chamber of Commerce said Monday the government’s approval of the CNOOC and Petronas transactions is a great first step in demonstrating Canada is open for business and foreign investment. However, more must be done to improve and clarify the net benefit test in the Investment Canada Act so companies know what they’re facing when it comes to foreign investment, the chamber says.
“We’re in a position where we really need to strengthen that legislation, because going forward these deals are basically the first of a sign of things to come,” said Ben Brunnen, director of policy and chief economist with the Calgary Chamber of Commerce.
The Alberta oilsands — the thirdlargest proven oil reserves in the world — represent about 56 per cent of total private sector oil investment opportunities worldwide, he said, so investors looking to Canada need a clearer set of rules.
“The demand for energy resources is going to be insatiable. It’s important that we get our rules up to date and done right at this point in time, because if we don’t we’re going to be scaring off some significant potential trade partners and investors moving forward to develop our energy resources,” Brunnen added.
The federal government released an updated foreign investment framework on Friday that establishes new rules for state-owned enterprises (SOEs) and serves notice that foreign takeovers of Canadian oilsands companies won’t be permitted going forward, except on “an exceptional basis only.”
Ottawa announced the changes the same day it approved China National Offshore Oil Corporation’s (CNOOC) $15.1-billion takeover of Calgary-based-petroleum producer Nexen, and a $6-billion bid from Malaysian national energy company Petronas for natural gas producer Progress Energy Resources.
But the government didn’t touch the “net benefit” test within the Investment Canada Act that applies to private foreign investment coming into Canada. The current legislation applies a broadly defined test to determine whether foreign investment meets the net benefit standard.
The Alberta government provided Ottawa a list of conditions it wanted attached to any federal approval of the CNOOC-Nexen transaction. Those conditions reportedly included guarantees that at least half of Nexen’s board and management positions would be held by Canadians; for CNOOC to maintain current staffing levels for at least five years; and a commitment to maintain
It’s important that we get our rules done right at this point in time BEN BRUNNEN
planned capital spending.
In a news release, CNOOC said it will “seek to retain” Nexen’s current management team and employees, and invest “significant capital” on oil and gas resources in Canada. CNOOC has also promised to make Calgary its North and Central American headquarters and to list CNOOC shares on the Toronto Stock Exchange.
Interim Liberal Leader Bob Rae said he’s concerned about the lack of clarity in the CNOOC and Petronas approvals and how the government determined it was a net benefit to Canada.
“We’re no better off than we were before in terms of understanding the reasons for the decision or the conditions which apply to the investment. So there’s a complete lack of transparency,” Rae said, calling for the terms, conditions and any guarantees from the approvals to be made public.
And the provincial government is still seeking clarity around what is considered a “net benefit” to Canada, including potential SOE joint ventures and “where that bar is set” on what’s considered an “exceptional basis” when it comes to takeovers of oilsands companies.