Cnooc-Nexen deal puts feds between a rock and a hard place
Canadians are getting alarmed at the extent of Chinese investment in the oil patch
Canadian Prime Minister Stephen Harper is sending signals that the approval of Cnooc Ltd.’s $15.1 billion proposed takeover of Nexen Inc. is going to get a thorough vetting, and Beijing is going to have to make some trade concessions if the Canadian government is going to approve the deal.
Bloomberg’s Theophilis Argitis and Andrew Mayeda report that Harper says Canada is open to investment from China as long as the Middle Kingdom is willing to do the same.
Critics of China’s North American investment forays have complained that until foreign companies are allowed to buy and take over Chinese firms, that government’s here shouldn’t allow China to buy homegrown companies.
The tough talk from Harper may be coming because the prime minister recognizes Canadians are getting alarmed by the amount of investment China is making in Canada’s oil patch, with the Cnooc-Nexen deal being the most high profile example of this so far.
But Harper finds himself in a tight spot here. If the federal government scuttles Cnooc’s takeover bid, as it did when BHP Billiton tried to buy Potash Corp. for $40 billion in 2010, it risks angering Beijing and putting a chill on future Chinese investment in the oil patch.
And that wouldn’t please the companies that populate Calgary’s highrise office towers. Canadian companies don’t have the capital to fund their growth plans (particularly in the oil sands sector). Whether it’s coming from China or Timbuktu, the industry argues, foreign investment funds the development of projects that wouldn’t happen otherwise, and that creates jobs for Canadians.
The Harper government doesn’t have finish its review of the deal until mid-October. But it might look to extend that by 30 days if it can get Cnooc to agree. Keep an eye on developments in this deal. You know the Chinese and Nexen shareholders will be.