* Source says issues on commercial side still not settled
* No suggestion that talks are at an impasse
* Alberta premier supportive but wants CNOOC commitments
* U.S. Steel deal is a precedent for job/investment commitments
* Nexen shares fall
By Randall Palmer
OTTAWA, Nov 20 China's CNOOC is still discussing Canadian demands on jobs and investment as it negotiates terms for its $15 billion bid for oil and gas producer Nexen Inc, a source familiar with the negotiations said on Tuesday.
Differences center on commercial aspects of the deal, particularly commitments that the Chinese state-owned energy company will make on employment and capital expenditure, said the source, who declined to be identified due to the sensitivity of the issue.
"There do remain important issues outstanding," the source said, adding that talks were continuing and there was no sign of an impasse.
The Canadian government is set to rule by Dec. 10 on whether to approve the takeover, which is one of two pending offers for domestic companies by Asian state-owned enterprises.
Separately, Petronas, the Malaysian state-owned company that wants Canada to approve its bid for Progress Energy Corp, said it had again extended the closing date of its offer, to Dec. 30 from Nov. 30.
Canada rejected Petronas's initial offer, ruling that the deal would not bring a net benefit to Canada. Petronas has since modified its bid, a source said last week.
The Canadian government has promised to clarify its rules on foreign investment as it announces its decisions on the two takeovers.
The CNOOC takeover has been controversial in Canada, where the Conservative government is trying to satisfy both its demand for more foreign investment and a diversified export market for Canadian energy products, as well as appeasing lawmakers wary of deal-making with China.
CAPEX, JOBS COMMITMENTS SOUGHT
The source close to the Nexen talks said discussions between Canada's industry department and CNOOC have centered largely on requests from Alberta Premier Alison Redford, who sought commitments on capital expenditure, employment and Canadian participation in Nexen.
"The Alberta intervention was a constructive one and one that had a basis for discussion," the source said.
"Industry Canada will always push you on commercial undertakings, and this is no exception."
Alberta is Canada's largest oil-producing region and home base for Nexen, the country's 8th most valuable energy producer.
Redford generally favors the transaction, in stark contrast to Saskatchewan Premier Brad Wall's opposition to the 2010 bid from BHP Billiton Ltd for fertilizer maker Potash Corp . Canada rejected that bid.
Sources say Ottawa typically presses companies to improve an offer rather than setting a simple numerical formula.
The Globe and Mail said on Tuesday that Canada wanted CNOOC to make "an unprecedented level of promises on investment and employment that would erode the commercial viability of the transaction."
Bloomberg on Monday night said CNOOC had accepted management and employment conditions needed for Canada to approve the deal.
Bloomberg later said negotiations were still pending on matters related to CNOOC's status as a state-owned enterprise and on the extent of capital spending requirements, an idea that raised eyebrows among analysts.
Morningstar's Robert Bellinski asked how CNOOC could guarantee capital expenditures, as spending in the oil industry is tied to commodity prices and the availability and timing of projects. "If oil goes down to $50 a barrel, are they stuck spending a couple of billion dollars? I would never agree to that," he said.
"Maybe they build in some kind of mechanism, like, 'If oil is this, we'll spend that.' But just off the cuff, employment guarantees and capex -- it's been speculated ever since the deal was announced and especially after the Progress Energy bid first got declined."
Ottawa has tied past agreements on foreign investment to employment levels. It extracted one such promise when U.S. Steel Corp bought Stelco in 2007. When U.S. Steel decided to idle the Stelco facilities and lay off its employees, then-Industry Minister Tony Clement sued.
The company eventually settled with Ottawa, with a commitment to keep two plants open and to boost its investment beyond its original commitment.
A CNOOC spokeswoman in Beijing declined to comment on the original Bloomberg report, but said the company's promise still stood to retain all of Nexen's management team and employees.
Earlier this month, CNOOC Chairman Wang Yilin said he was confident of winning regulatory approval from Canada this year. )
Nexen shares were slightly lower. In New York the shares traded at were at $25.31, below the $27.50 bid price.
Canada's New Democrats, the biggest opposition party, opposes the takeover. Justin Trudeau, the front-runner in a race to lead the third-placed Liberal Party, said on Tuesday the proposal was a "good deal" for Canada.
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