OTTAWA (Reuters) - During visits to China and South Korea next week, a senior Canadian official will promote investment in Canadian oil and gas firms despite strict limits Ottawa imposed in 2012 on foreign purchases in the energy sector.
Canada’s Conservative government last year allowed Chinese firm CNOOC Ltd (0883.HK) to buy energy company Nexen while making clear that foreign state-owned companies would not be allowed in the future to buy majority stakes in energy companies.
But, Canadian officials welcome investment by foreign state-owned companies as long as these firms realize they can only buy minority stakes in Canada’s energy companies.
In a high-profile speech last week, a former Conservative minister said the rules were deterring investors and noted foreign purchases of Canadian energy firms had plunged this year.
Natural Resources Minister Joe Oliver will visit South Korea and China next week and he said one of his objectives would be to make clear Canada still welcomed foreign investment.
“We’re talking here in China and Korea about very knowledgeable shrewd investors ... but there nevertheless can be in their reading some uncertainty or confusion about where we’re coming from and that’s why it’s important to talk about that,” he said in an interview on Thursday.
Oliver’s comments were a rare public acknowledgement by a government minister that the new limits had the potential to put off investors.
Canada is keen to develop the oil sector, in part because it wants to start exporting crude to China and other Asian nations.
“I don’t wish to dismiss entirely the issue of what people might be reading into the rules ... While we have said we’re still open for business, that has to be confirmed,” he said.
Former Conservative Industry Minister Jim Prentice, now vice chairman of the Canadian Imperial Bank of Commerce, said last week that investment in Canada’s energy sector had plunged this year and laid part of the blame on the new rules, which he said were deterring foreign companies.
Prentice said overall mergers and acquisitions in Canada so far in 2013 had dropped to C$3 billion (US$2.9 billion), compared with C$66 billion a year ago, and said investment from Chinese state-owned enterprises had virtually ground to a halt.
Oliver, though, attributed the decline to the cyclical nature of investing and investor sentiment.
Citing data from Price Waterhouse Cooper, he said global mergers and acquisitions in the oil and gas sector fell from $154.6 billion in the fourth quarter of 2012 to $46.9 billion in the first quarter of 2013 and $45.4 billion in the second quarter.
The government is a strong supporter of the natural resources sector and last year passed legislation making it easier for large projects such as mines and pipelines to be built. That move prompted protests from environmentalists.
Oliver said Canada needed C$650 billion in investment in the natural resources sector alone over the next decade, much of which would have to come from abroad.
Malaysia’s state oil firm Petronas PETR.UL plans to spend $35 billion to develop shale gas assets in Canada and build a liquefied natural gas export terminal linking the country to Asian markets, company officials said on Monday.
“I would call it a massive show of confidence in the Canadian economy,” said Oliver.
Editing by Bob Burgdorfer