Canada blocks $5.2 billion Petronas bid for Progress Energy

Sat Oct 20, 2012 7:57pm EDT
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By Euan Rocha and Stuart Grudgings

TORONTO/KUALA LUMPUR (Reuters) - Canada has blocked Malaysian state oil firm Petronas' C$5.17 billion ($5.2 billion) bid for gas producer Progress Energy Resources in a surprise move that could signal problems for a much larger Chinese deal in the country's energy sector.

Canada's announcement late on Friday, minutes before a deadline, was a blow to Petronas, whose domestic oil supplies are shrinking and which has been seeking to boost its resources beyond Malaysia and volatile areas such as Sudan.

It also raises doubts over Chinese oil group CNOOC's C$15.1 billion offer for oil producer Nexen and could weigh on other Canadian firms hoping for foreign investment to tap their vast energy reserves.

A rejection of the CNOOC bid would likely damage trade ties Canada has been trying to build with China, underlining political sensitivity to Chinese corporate expansion in North America.

"I have sent a notice letter to Petronas indicating that I am not satisfied that the proposed investment is likely to be of net benefit to Canada," Industry Minister Christian Paradis said in a statement.

The government, which has said C$630 billion investment is needed in Canada's energy sector over the next decade, has been trying to balance concerns over the deals with that requirement for capital.

The companies have 30 days to make the offer more palatable.

Progress Chief Executive Michael Culbert said he was disappointed with the ruling and his company would take the next month to try to determine what concerns led to the rejection and what potential remedies might assuage them. Petronas had no comment on Saturday.   Continued...

Motorists pump natural gas at a Petronas station in Kuala Lumpur July 1, 2010. REUTERS/Bazuki Muhammad