November 28, 2012 / 12:22 AM / 6 years ago

Canada says still examining options on CNOOC bid

OTTAWA (Reuters) - The Canadian government is still mulling its options as deadlines near on two proposed foreign takeovers of domestic energy companies, but an official offered no clues on when or how Ottawa would announce the hotly debated decisions.

A logo of China National Offshore Oil Corp (CNOOC) is seen at the top of its headquarters in Beijing November 14, 2012. REUTERS/Petar Kujundzic

Andrew MacDougall, spokesman for Prime Minister Stephen Harper, did not comment on a report that the federal government might want China’s CNOOC to sell the 7 percent stake that takeover target Nexen Inc holds in the large Syncrude oil sands joint venture, because fellow Chinese company Sinopec Group has a 9 percent stake in it.

“The government is examining its options,” he said by email.

The Conservative government is trying to balance the need for foreign investment to develop natural resources with concern that China and other countries could snap up a big chunk of the energy sector, and that state-owned firms might not play by free-market rules.

It faces a deadline of December 10 for deciding on whether to allow the $15.1 billion Nexen bid. A separate decision is pending on a bid by Malaysia’s Petronas for Progress Energy Resources Corp, while Ottawa also promises to clarify its overall guidelines on foreign investment.

The CNOOC bid featured in the campaign for a parliamentary seat in the center of the oil city of Calgary. No decision came before a November 26 election there and in two other cities, as observers had predicted.

The report of possible conditions attached to the Nexen deal came from Business News Network anchor Howard Green, who also said his sources were saying that Harper’s chief of staff, Nigel Wright, was likely the author of guidelines on Canada will deal with bids from state-owned enterprises like CNOOC.

Wright had takeover experience at private equity firm Onex Corp before joining the government.

Nexen shares were 2.5 percent lower at $24.15 in New York by mid-afternoon, below CNOOC’s offer price of $27.50.

MacDougall declined to confirm either hypothesis or to detail the timeline for decisions on either the foreign investment framework or on the two bids.

Though December 10 is the deadline for Nexen (and even that can be extended if all sides agree), investors are also eyeing November 30 after online news service deal Reporter quoted Canada’s consul general in New York, John Prato, as saying that the government has said it would issue the foreign investment guidelines during November.

The Conservative party is divided on what to do about Chinese investment.

Preston Manning, founder of one of the groups that formed the current Conservative Party, wrote last week that Ottawa should oppose bids by state-owned firms on principle, especially those owned by a government whose values differ sharply from Canada’s, unless a deal can be structured so that the Canadian perspective prevails in regard to the Canadian operations.

Other Conservatives, including former Industry Minister Jim Prentice, have argued in favor of the deal.

In Toronto on Tuesday, Alison Redford, Progressive Conservative premier of the oil province of Alberta, noted that foreign investors once owned 78 percent of the energy patch, and the result of the involvement of outsiders was that Alberta is now Canada’s economic engine.

“It’s not something that we are hesitant about,” she said of foreign investment.

“We think that if you want to play on the international stage and you have the sorts of resources that we have in Canada, it’s important for us to be able to build those business partnerships,” she told reporters.

(This story corrected second paragraph to show that Sinopec Group, not Sinopec Corp, has a 9 percent stake in Syncrude)

Editing by Janet Guttsman and David Gregorio

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