September 27, 2012 / 5:59 PM / in 5 years

Two high-profile Canadian Conservatives back CNOOC deal

The Nexen building is seen in downtown Calgary, Alberta, July 23, 2012. REUTERS/Todd Korol

OTTAWA/CALGARY, Alberta (Reuters) - Two former top aides to Canadian Prime Minister Stephen Harper said on Thursday he should approve a $15.1 billion bid by China’s CNOOC Ltd (0883.HK) to take over Canadian oil producer Nexen Inc NXY.TO, saying the benefits outweigh the risks.

Canada’s governing Conservatives are split over the bid, with some party members concerned about letting a Chinese state-owned enterprise buy Canadian energy assets. Fans of the deal, which would be China’s largest-ever overseas acquisition if approved, say China can help provide the huge foreign investment Canada needs to develop the oil-rich tar sands of Alberta, one of the world’s biggest crude deposits.

Former Conservative industry minister Jim Prentice, now a vice president at Canadian Imperial Bank of Commerce (CM.TO), said he thought the government would allow the bid to go ahead.

Speaking to a business audience in Calgary, Prentice said failing to approve the deal would imperil access to the Chinese market for Canadian oil producers and sunder the budding relationship being forged between the Canadian and Chinese governments.

“We are in the midst of building a strategic partnership with China,” Prentice said. “I think it would be a very bad time to turn around in the middle of the road.”

Current Industry Minister Christian Paradis is studying the CNOOC bid to see if it is of net benefit to Canada. The initial 45-day deadline for a government decision expires on Oct 12, but the government is likely to extend it for another 30 days.

The Conservative government shocked markets in 2010 by rejecting Australian miner BHP Billiton Ltd’s takeover bid for Canadian fertilizer producer Potash Corp, making markets wary of what stance the government will take on Nexen.

Prentice said he believes Canada will approve the transaction but will attach conditions to ensure CNOOC’s presence is a benefit to Canada and that it operates on the same basis as an investor-owned company.

“I think the government will see the wisdom of the transaction. I think the public will see the wisdom of the transaction,” he told reporters. “We need capital. It’s a very difficult time to turn around in terms of this budding relationship with China and I think that the nature of the assets are such that the transaction shouldn’t be refused.”

Tom Flanagan, Harper’s former chief of staff, also urged the government on Thursday to approve the CNOOC bid, a move he said that would show Canada is still open for business.

“The critics have genuine concerns, which deserve to be discussed, but I think it would damage Canada’s interests for the minister of industry to reject this acquisition,” he wrote in the Globe and Mail newspaper.

He also noted there had been no public opposition to the deal from the influential Canadian oil and gas industry.

Reporting by David Ljunggren; Editing by Peter Galloway

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