OTTAWA (Reuters) - Canada said on Thursday that a $15.1 billion Chinese bid for domestic oil company Nexen Inc raised difficult policy questions, but the government gave no sign it would bow to an opposition demand to veto the deal.
Speaking hours after the main opposition party demanded a veto on CNOOC Ltd’s bid, Prime Minister Stephen Harper said the government would look at a range of issues in determining whether the deal, the largest foreign takeover ever launched by a Chinese firm, would be of net benefit to Canada.
The deal has also raised rare public signs of unrest among Conservative legislators, some of whom fret about the idea of a Chinese state-owned enterprise buying Canadian energy assets.
“This particular transaction raises a range of difficult policy questions, difficult and forward-looking issues. Those things will all be taken into account,” Harper told reporters in Ottawa, when asked about the bid.
Fund managers and market analysts say they expect Ottawa to approve the deal, though not without conditions.
These could include seeking guarantees on employment and investment, requiring that CNOOC promise to follow Canadian laws and practices and demanding that a certain number of Canadians be appointed to the board of directors.
“Our position has been to be generally welcoming of foreign investment, but at the same time as you know we have approved many transactions, we have significantly modified some, and we have blocked some transactions,” said Harper.
Canada, a leading energy exporter, has the world’s third-largest proven oil reserves, most of them in the western province of Alberta.
The government is trying to balance concerns over the CNOOC bid with a huge need for foreign energy investment. Ottawa says C$630 billion ($643 billion) in investment is needed over the next decade alone, with much of it to come from overseas.
The Conservatives last blocked a deal in November 2010 when they shocked financial markets by preventing BHP Billiton Ltd from buying fertilizer maker Potash Corp, which is based in the western province of Saskatchewan.
Fund managers and arbitragers say the memory of the Potash deal - which foundered over opposition from the Saskatchewan government and federal Conservative legislators from the province - means there remains an element of doubt over Nexen.
CNOOC officials could not be reached for comment after Prime Minister Harper’s remarks. China is celebrating its Golden Week of public holidays this week.
However, a source familiar with recent talks between CNOOC and Canadian politicians said Harper had said nothing new and that the deal was still expected to get approved with conditions.
“This is nothing new. This didn’t break any new ground,” the source said, noting that conditions were to be expected.
Nexen shareholders have already voted overwhelmingly to accept the bid and the Alberta government is in favor.
Harper says Ottawa will take public opinion into account before making a decision. Polls have shown most Canadians oppose China buying Nexen.
Asked about speculation the United States was putting pressure on Canada to scrap the deal, Harper replied: “The government of Canada will take its own decision irrespective of what the government of the United States does. We don’t obviously follow their judgments in these matters.”
CNOOC said on September 5 that it had asked the U.S. government to review its bid for any national security concerns.
A handful of U.S. lawmakers have asked Treasury Secretary Timothy Geithner to review the deal with one urging Washington to block the deal in order to extract trade and investment concessions from the Chinese government. The U.S. has the power to require Nexen to divest its U.S. holdings, or impose other conditions in the event of a CNOOC acquisition.
Canada’s main opposition party, the center-left New Democrats (NDP), demanded Harper block the bid, saying approval of the deal could trigger “a tidal wave” of foreign takeovers.
The NDP has no power to prevent the deal, but the party’s comments reflect the political sensitivity of the affair.
NDP natural resources spokesman Peter Julian said criteria for determining “net benefit” - a rule that must be met for a foreign takeover to go ahead - was far too vague and excluded questions about jobs, human rights, national security and the environment.
Julian wants the government to hold public hearings on the bid. He cited what he said was the risk of “a number of other takeover deals that are pending. Some people have said it’s a tidal wave of takeovers that are coming down the pike”.
Industry Minister Christian Paradis, ultimately responsible for deciding whether to approve the CNOOC bid, said the NDP’s actions were reckless and irresponsible.
Additional reporting by Louise Egan and Charlie Zhu; Editing by Janet Guttsman, Frank McGurty and Carol Bishopric