Canada won promises from China in backing Nexen deal - minister

TORONTO Mon Dec 10, 2012 2:51am IST

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

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

Credit: Reuters/Petar Kujundzic

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TORONTO (Reuters) - Canada wrested "significant" commitments from China's CNOCC on issues of corporate governance and transparency as part of its approval of the acquisition of a swath of Canada's valuable oil sands reserves, Industry Minister Christian Paradis said on Sunday.

Defending the $15.1 billion takeover of Nexen, one of Canada's largest independent oil companies, in the face of grumbles from the left, Paradis said that Canada won "significant undertakings" from CNOOC.

Canada announced on Friday that, after months of study, it would allow CNOOC's $15.1 billion acquisition of Nexen Inc, a controversial ruling given concerns from some in the ruling Conservative party about China's human rights record.

Paradis said CNOOC made promises involving the management of Nexen and that the Chinese company would have report back to the Industry Ministry to ensure conditions are being met.

Canada made "sure that we had significant undertakings in terms of governance, about transparency, about disclosure," Paradis told CTV's "Question Period" program.

Paradis said he could not provide details for commercial reasons.

Under the deal, CNOOC will get full control of Nexen's Long Lake oil sands project in northern Alberta, properties containing as much as six billion barrels of recoverable crude and a 7.2 percent stake in the Syncrude Canada Ltd joint-venture.

The ruling, closely watched by investors, followed months of heated debate over how much of Canada's energy sector, and especially its oil sands, should be absorbed by companies run by other governments.

Opposition leader Thomas Mulcair said the only clear winners in the deal were oil company shareholders.

"The only clear net benefit is to Nexen shareholders in Mr. Harper's oil patch," Mulcair, leader of the New Democratic Party, said in an interview on Global TV's "The West Block." "I think it has as much to do with that as anything else."

The Nexen deal is the largest successful foreign takeover ever by a Chinese company. Separately, Ottawa on Friday also gave the green light for the purchase of Progress Energy Resources Corp by Petronas of Malaysia.

Prime Minister Stephen Harper served notice, however, that future investments by state-owned enterprises would face much tighter scrutiny.

Paradis reiterated Harper's statement that it was time to "draw a line" against any further encroachment by foreign state-run enterprises in the oil sands, which are the world's third largest oil resource after those in Saudi Arabia and Venezuela.

Analysts said the Canadian government's announcement brought some clarity to the market, which could help boost the already strong Canadian dollar.

"It does show a willingness from Canada's government to encourage foreign investment which speaks to a longer-term interest into the Canadian dollar," said David Tulk, chief Canada macro strategist at TD Securities.

The Harper government said it would still welcome non-controlling minority investments by state-run enterprises in Canadian companies, while insisting that the door remains open to private-sector firms.

Two years ago Canada had rejected BHP Billiton's $39 billion bid for Potash Corp, on the grounds that it was not in Canada's net interest.

CNOOC will also acquire Nexen's 43 percent stake in the Buzzard field in the North Sea, the most important contributor to the crude blend used to set the Brent crude price that serves as the international oil price benchmark.

Nexen also has oil production from Yemen, offshore West Africa and the Gulf of Mexico.

Petronas offered C$5.2 billion ($5.3 billion) for Progress, a mid-size gas producer.

Nexen shares fell 6.3 percent to C$23.29 on the Toronto Stock Exchange on Friday, before the announcement was made. . Nexen's New York-listed shares surged in after-hours trading. Progress fell 88 Canadian cents, or 4.4 percent. to C$19.37.

($1=$0.99 Canadian)

(Additional reporting by Euan Rocha and Alastair Sharp; Editing by Leslie Adler)