More delay possible for Nexen review
Decision to coincide with new foreign investment guidelines?
OTTAWA — The clock is ticking on the deadline for a federal decision on the Chinese takeover of Nexen and a new set of foreign investment rules, with provinces, corporate Canada and opposition parties demanding a review process that includes more clarity but presents an attractive business climate. Federal Industry Minister Christian Paradis mused Wednesday that the government’s Dec. 10 deadline for a decision on China National Offshore Oil Corporation’s (CNOOC) $15.1-billion proposed takeover of Calgarybased petroleum producer Nexen “could be extended.”
The Conservative government has already twice extended its review of the transaction and can seek additional time with CNOOC’s permission. Prime Minister Stephen Harper has promised to announce his government’s updated rules governing foreign investment and takeovers around the same time as its decision on CNOOC’s takeover bid for Nexen. Any delay in announcing a decision on the transaction would likely also delay the release of a new foreign investment framework. Alberta Intergovernmental Relations Minister Cal Dallas said Wednesday the province hopes the CNOOC deal is approved because the province needs substantial foreign investment in the coming years to help develop its petroleum riches, including the cost-intensive oilsands. However, Alberta is also hoping the federal government will provide greater clarity on its foreign investment review process and how Ottawa decides on whether a takeover is considered of “net benefit” to Canada, he said.
“The clarity is the key to this. We recognize that even in Alberta there’s a certain number of Albertans that are concerned, that have some angst,” Dallas said in an interview on Parliament Hill. “Clarity will go a long ways to addressing and having a conversation around the issues that are important and real.”
The Alberta government provided Ottawa with 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 planned capital spending.
The Harper government is also expected to announce a decision shortly on a proposal from Malaysian national energy company Petronas to acquire Calgary-based natural gas producer Progress Energy Resources. The Conservative government initially blocked the $6-billion takeover in October because the acquisition didn’t meet the “net benefit” test under the Investment Canada Act, although Petronas tweaked its proposal in hopes of receiving federal approval.
With government decisions on the takeovers and foreign investment rules looming, Paradis hinted Wednesday another extension is possible beyond the Dec. 10 deadline.
“This is the deadline. It could be extended, but once again, I won’t speculate,” Paradis told reporters in Ottawa. “The idea here is I don’t want to send any signals. When the decisions are ready to announce, when they are made, when they are ready to announce, this will be done. But no speculation. Don’t interpret nothing from what I’m saying here.”
The takeover bid has sparked intense debate within the Conservative government about how much foreign investment Canada should allow in strategic natural resources such as oil and gas. A number of Conservative MPs, including some ministers, are believed to oppose CNOOC’s takeover of Nexen because they’re worried about letting Chinese stateowned companies acquire such a significant stake in Canada’s resource sector.
It’s expected the government will clarify how it decides if foreign investment is of “net benefit” to Canada, currently a broadly defined test under the Investment Canada Act.
Interim Liberal Leader Bob Rae believes the government should replace the net benefit test with a “national benefit test” that considers sustainable development, enhanced technological and innovative capacity and an appropriate number of Canadians employed by the company and in management, among other measures.
Additional scrutiny must be applied to state-owned enterprises like CNOOC and Petronas, he said, to ensure they are transparent in their management structure and operations.
“We think there needs to be much greater clarity for Canada about the kinds of questions we will be asking and the sorts of requirements that we will have,” Rae said.