In switch, Canadian papers back CNOOC's Nexen bid

OTTAWA (Reuters) - Canada's Sun newspaper group on Tuesday reversed its opposition to federal government approval of a $15.1 billion bid by Chinese state-owned oil company CNOOC Ltd for Canada's Nexen Inc, saying a bilateral agreement signed last week was a "game changer."

The Sun group, which has a conservative editorial bent, had been the loudest public opponent to the proposed deal, running a hostile editorial after it was announced, commissioning a poll that showed public opposition to it and pressing Prime Minister Stephen Harper on the issue in a news conference.

The chain, whose papers include the Ottawa Sun and Calgary Sun, said in July the government should stop the deal, or insist on a quid pro quo if approved. The papers are owned by Quebecor Media Inc.

In an editorial on Tuesday, however, it hailed the signing on Saturday of a Foreign Investment Promotion and Protection Agreement between China and Canada, saying the pact cast the Nexen deal in a fresh light.

Canadian Prime Minister and Chinese President Hu Jintao witnessed the signing of the agreement on Saturday on the margins of an Asia-Pacific meeting in Vladivostok, Russia.

It is intended to ensure that two-way investment can take place in a secure manner, with legally binding provisions ensuring greater protection against discriminatory and arbitrary practices, though it does not require each country to approve each proposed investment.

The "China-Canada investment agreement is a game changer toward serious consideration of approving the Nexen sale to the state-owned China National Offshore Oil Corp (CNOOC)," the editorial said.

Ottawa is required under its foreign investment legislation to determine whether the CNOOC bid would provide a "net benefit" to Canada, a review that could extend into November.

Harper's cabinet appears to be divided on how to handle the bid. At least two senior ministers are opposed to the a Chinese state-owned company making such a large investment in the country's resource sector, government sources say, while at least one or two other senior ministers are leaning toward approval.