Feds must weigh more than public opinion in Nexen deal
Rejecting the $15.1 billion deal will have a chilling effect on Chinese investment in the oil patch, expert says
Gordon Houlden admits he was surprised by the results.
Houlden is the director of the University of Alberta’s China Institute, and on Wednesday it released its annual survey on Albertans’ views on China.
And the survey results that caught Houlden by surprise were that Albertans have a strong distaste for Chinese investment in the form of full ownership (64 per cent opposed) and investment in the province’s oil and gas industry by Chinese state-owned companies (53 per cent opposed).
“Albertans views are conflicted on China,” Houlden said in a telephone interview Wednesday afternoon, noting that the survey also shows that 53 per cent of Albertans disagree that China’s growing economic strength poses a threat to Canada.
The survey results come as public interest in, and scrutiny of, Chinese investment in Canada’s oil patch grows – in no small part thanks to state-owned Cnooc Ltd.’s proposed $15.1 billion takeover of Calgary-based Nexen Inc.
The deal, which has been approved by Nexen shareholders, is currently being reviewed by the Canadian federal government to see if the deal would be in the national interest.
It’s been widely assumed the federal government will approve the deal, but the feds decision on Oct. 19 to reject a $6 billion deal where Malaysia’s state-owned Petronas would have acquired Calgary-based intermediate Progress Energy has some industry observers wondering if the Cnooc-Nexen deal might suffer the same fate.
Natural Resources Minister Joe Oliver didn’t dampen those worries on Wednesday when he said public opinion is a factor the Conservative government considers when it reviews foreign takeovers of Canadian companies.
But Houlden says governments can’t make decisions solely based on public opinions because “that results in zig-zag policies. The numbers will likely shift again.”
Another factor the feds must weigh is the fact the Canadian oil patch can’t fund its growth plans all by itself. It will need deep-pocketed partners to do that, and China has some of the deepest pockets around.
Then there is the negative impact a rejection of the Nexen takeover would have on Chinese investment in Canada, particularly in the oil and gas industry.
“The Chinese hate to lose face, ” Houlden says. “[A rejection] might have a chilling effect on investment in the near-to-medium-term, but not the long-term.”