Canadian oil-sands takeover approved

The Canadian prime minister has approved China National Offshore Oil Corporation's $15.1bn takeover of Nexen and Petroliam Nasional's C$5.2 billion (Dh19.34bn) takeover of Progress Energy Resources.

Stephen Harper, the Canadian prime minister, has approved China National Offshore Oil Corporation's US$15.1 billion (Dh55.46bn) takeover of Nexen, and Petroliam Nasional's C$5.2 billion (Dh19.34bn) takeover of Progress Energy Resources.

The deal by Beijing-based CNOOC is the largest ever takeover by a Chinese company, according to data compiled by Bloomberg.

It gives the state-owned company a stake in Canada's largest oil-sands project and the biggest position in the Buzzard oilfield in the United Kingdom's North Sea.

China is securing global reserves to feed demand in the world's second-largest economy, which accounted for half of the world's oil consumption growth last year, according to the US energy information administration.

Mr Harper, who has touted Canada as an emerging "energy superpower", has called it a national priority to diversify energy exports, sending less to the United States and more to Asia.

"It's important to have clarity on this, not just for Canada's foreign relations with certain super-power nations but also to ensure timely development of these very important resources," said Robert Gill, a portfolio manager at Toronto-based Aston Hill Financial, which has more than C$6bn assets under management.

The two bids tested Mr Harper's ability to balance the need to bolster economic relations with Asian economies without letting them gain too much influence over the world's third-largest pool of oil reserves.

"I express my appreciation for Canada's welcome of our investment," Wang Yilin, the chairman of CNOOC, said yesterday.

The deal "recognises the long-term economic benefits for Calgary, for Alberta and for Canada. Our company will also benefit by adding Nexen's impressive assets and outstanding employees to our worldwide operations."

While allowing the takeovers, Mr Harper said Canada would not approve state-owned companies taking controlling interests in any more oil-sands projects, except in "exceptional circumstances".

"These were difficult decisions" that reflect "the broad views of Canadians", said Mr Harper.

Canada relies on exports for one-third of economic output and counts on energy products for almost a quarter of those shipments. "From a perspective of industry this is the perfect solution," said John Stephenson, who helps to manage C$2.7bn at First Asset Management in Toronto.

"You get the benefit of patient capital servicing value for investors and you don't give up control, which is really the issue most Canadians feel passionately about."

Canada is effectively "grandfathering the CNOOC and Petronas deals," Stephen Wortley, a partner at McMillan and chairman of the Canadian law firm's Hong Kong office, said in an email.

"At the same time the government is signalling that tougher standards will be forthcoming especially in the oil sands, where there is a concern about the potential for concentration" of foreign state-owned companies, he said.

The CNOOC-Nexen transaction is the biggest in Canada since Calgary-based Suncor Energy bought Petro-Canada in August 2009 for about $18bn.

Through its C$2.1bn acquisition of Opti Canada last year, CNOOC already owns 35 per cent of the Long Lake oil-sands project operated by Nexen.

"This is an important milestone in the process and confirms our belief that this transaction provides a number of significant benefits to Canada and to Nexen," said Kevin Reinhart, Nexen's interim president and chief executive. "We remain focused on working with CNOOC to bring this transaction to a close."

Progress shares, which surged 74 per cent on the day the first bid by Petronas was announced June 28, closed at C$19.35 in Toronto. Petronas offered C$22 a share.

"We're obviously quite pleased with the decision," said Michael Culbert, the chief executive of Calgary-based Progress.

"We know that this has been a difficult decision to make and we don't take that lightly."