India state oil firms press ahead with Canada oil sands bid

Tue Dec 11, 2012 6:19am EST
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By Prashant Mehra and Nidhi Verma

MUMBAI/NEW DELHI (Reuters) - India's state oil companies intend to press ahead with plans to buy stakes in Canada's oil sands and believe they will not run afoul of tougher Canadian rules on foreign ownership of the sector.

A consortium of Oil and Natural Gas Corp ONGC.NS, Oil India Ltd OILI.NS and refiner Indian Oil Corp IOC.NS is among three bidders shortlisted to buy stakes in Canadian oil sands owned by ConocoPhillips COP.N. The assets could be worth up to $5 billion.

"We are very much in race for Conoco's assets," an official at one of the Indian consortium partners told Reuters, declining to be identified. The consortium submitted its bid in July.

"Our deal will not be affected as our understanding of the new rule is that JV stake sale or non-controlling stake sale are welcomed by Canada. However complete takeover will be approved as an exception," he added.

On Friday, Canada approved a $15.1 billion bid by China's CNOOC 0883.HK for Nexen NXY.TO and a $5.3 billion takeover of Progress Energy PRQ.TO by Malaysia's Petronas PETR.UL, but shut the door on similar deals in the future.

Prime Minister Stephen Harper said Canada would not deliver control of the country's oil sands -- the world's third-largest reserves of crude -- to another government.

The tougher new approach restricts state-owned enterprises to minority stakes in Canadian enterprises except in "exceptional circumstances".

"Our understanding is the restriction would apply only in the case of transactions at the corporate level and not at the asset level," said a resources banker with a leading U.S. bank in India, declining to be identified.   Continued...