* 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
* 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
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
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
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
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.