* Government has until Dec. 10 to rule on CNOOC bid
* Deadline could be extended if both firms agree
* Ottawa must decide that bid is of net benefit to Canada
By David Ljunggren
OTTAWA, Dec 7 (Reuters) - A powerful Canadian cabinet committee which has been studying CNOOC Ltd's $15.1 billion bid for domestic oil producer Nexen Inc met on Friday as the deadline loomed for Canada's ruling on the proposed Chinese takeover.
Ministers who attended the morning meeting offered no clues on their agenda, or on whether CNOOC had been under discussion. But the government has until the end of Dec. 10 to deliver its verdict on a bid that triggered a rare divide inside the ruling Conservative Party, where some legislators are wary of letting a Chinese state-owned enterprise buy Canadian energy assets.
If the deal is approved, it will be the largest successful foreign takeover by a Chinese firm.
Although the Canadian cabinet has no formal role in approving the deal, a powerful subcommittee chaired by Prime Minister Stephen Harper is following the affair closely.
Asked what topics were on the agenda, Indian Affairs Minister John Duncan replied: "There's only one."
Ministers were tight-lipped as they left the meeting. Industry Minister Christian Paradis is in nominal charge of deciding whether to approve the bid, but political officials and observers have no doubt that Harper will have a very large say.
Rejecting the deal could be embarrassing for Harper, who went to China in February to promote the idea of China buying Canadian oil and to press the message that Canada was open for business.
Canada says the natural resources sector needs C$650 billion ($660 billion) of investment in the next decade alone and much of the money will have to come from abroad.
"The idea that we're not going to have substantive links to what is likely to be the largest economy on earth ... would be really foolhardy in my view," said Gordon Houlden, a former Canadian diplomat with extensive Chinese experience who heads the University of Alberta's China Institute.
The government, which must decide if foreign takeovers are of net benefit to Canada, can extend the review period beyond the current Dec. 10 deadline, if both CNOOC and Nexen agree.
It's rare for Canada to reject a takeover, but markets still remember Ottawa's surprise 2010 veto of a $39 billion bid from BHP Billiton's for Potash Corp, the world's largest fertilizer producer.
PROGRESS BID ALSO PENDING
Paradis must also rule on a revised bid by Malaysia's Petronas for Progress Energy Resources Corp, after rejecting the bid unexpectedly in October.
The government is promising to release new guidelines for foreign investment, in particular rules for bids from state-owned enterprises like CNOOC or Petronas.
Harper spokesman Andrew MacDougall would not speculate on the timing of any announcement, saying: "Whatever the date, appropriate notice will be given."
People familiar with how Canada handles foreign takeover bids say CNOOC and Petronas will likely be told of the decisions less than an hour before Ottawa makes a formal announcement.
Officials say one important part of the considerations is how much Canada can persuade Beijing to cut red tape and remove other obstacles facing Canadian businesses in China.
China on Friday approved Glencore International Plc's C$6 billion purchase of Canadian grain handler Viterra Inc, clearing the last regulatory hurdle for that deal.
Analysts said the fact Beijing moved before Canada announced its verdict on CNOOC could be significant.
"Officially it doesn't mean anything..., but everybody knows this is a very sensitive time and at least it's symbolic," said Wenran Jiang, a senior fellow at the Asia-Pacific Foundation and an energy adviser to Alberta, where most of Canada's vast oil reserves are found.
"At least it helps the process. It won't hurt it," he said.
Market operators admit they are increasingly frustrated by the time it has taken Ottawa to make up its mind on CNOOC. The government has already extended the deadline twice.
By 12:40 pm eastern (1730 GMT) Nexen shares in New York were up 18 cents, or 0.7 percent, at $25.35, still below CNOOC's $27.50 offer price.
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