India state oil firms press ahead with Canada oil sands bid

Tue Dec 11, 2012 5:11am EST
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By Prashant Mehra and Nidhi Verma

MUMBAI/NEW DELHI Dec 11 (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, Oil India Ltd and refiner Indian Oil Corp is among three bidders shortlisted to buy stakes in Canadian oil sands owned by ConocoPhillips. 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 for Nexen and a $5.3 billion takeover of Progress Energy by Malaysia's Petronas, 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 cirsumstances".

"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...