U.S. lawmaker asks for conditions on CNOOC-Nexen deal

Mon Jul 30, 2012 4:33pm EDT
 
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By Roberta Rampton

WASHINGTON (Reuters) - The U.S. government should block a bid by China's state-owned CNOOC (0883.HK: Quote) for the U.S. assets of Canadian oil firm Nexen NXY.TO unless the merged company agrees to pay royalties on all oil drilled offshore, or spins off the properties, Representative Edward Markey said on Monday.

Markey, a Democrat, is the second U.S. lawmaker to formally ask for conditions on CNOOC's bid for Nexen, which has about 10 percent of its assets in the U.S. Gulf. Opposition from some factions in Washington has added a modicum of uncertainty as CNOOC tests Canada's tolerance for such a large transaction.

The $15.1 billion deal has raised some hackles in Washington, but the opposition has been muted compared to 2005, when CNOOC tried to buy U.S. oil company Unocal, withdrawing its bid after a political uproar.

By law, the U.S. government examines foreign investment in sensitive U.S. assets such as energy for national security issues, and has the power to block deals or require modifications such as divestitures.

Nexen holds at least two leases issued under the 1995 Deep Water Royalty Relief Act, said Markey, the top Democrat on the House of Representatives' Natural Resources Committee, who has long criticized companies that have benefited from a royalty loophole in the law.

In a letter to Treasury Secretary Timothy Geithner, who leads the investment review panel, Markey said Nexen has not paid royalties on 32 million barrels of oil and 34 million cubic feet of natural gas drilled in the U.S. Gulf of Mexico through May 2012.

"Giving valuable American resources away to wealthy multi-national corporations is wasteful, but giving valuable American resources away to a foreign government is far worse: it has the potential to directly undermine American economic and national security," Markey said in the letter.

ROYALTY LOOPHOLE   Continued...