Tuesday, July 31, 2012

SaskOil from Saskatchewan government owned to Chinese government owned

SaskOil began as a provincially owned Saskatchewan corporation in 1973. Privatization began in 1986. Eventually SaskOil assets became Canadian Occidental Energy (CanOxy) and finally Nexen in 2000. Chinese state owned CNOOC bought Nexen in July 2012.

 Saskatchewan Oil and Gas Corporation or SaskOIl as it was commonly called was created by the New Democratic provincial government of Allan Blakeney in 1973. Blakeney also created a crown corporation in the potash industry. In spite of Blakeney's pursuit of government ownership in oil and potash development Blakeney's leadership of the party was regarded as a victory for the establishment against the Waffle Group within the NDP who were campaigning for an independent socialist Canada. The Waffle group even had their own manifesto the Waffle Manifesto.

 The Blakeney government saw SaskOil as a means to facilitate government investment in Saskatchewan's oil and gas resources. The increase in oil prices in the period also encouraged the government to help fund its own programs through income from the developments. The corporation provided a means for the government to gain expertise and knowledge in the oil and gas development industries. In the seventies the company grew rapidly and took over existing companies as well. By 1976 SaskOil was producing 6 per cent of total Saskatchewan oil. However, it also also acquired properties in other areas of western Canada. SaskOil also had a research and development branch. With the start of privatization in 1986 these functions were transferred to the Saskatchewan Research Council. Profits from oil are for private companies. Costs for research are socialized.

 Privatization began in 1986 under a Conservative government. In 1996 SaskOil became Wascana Energy. In 1997 Canadian Occidental Petroleum bought Wascana Energy and the last government shares were sold off with the sale. Occidental merged all its Canadian assets under the corporate name Wascana Energy. Occidental in turn was taken over by Nexen and renamed Nexen Canada.

 In July of this year CNOOC bought Nexen for 15.1 billion U.S. although the deal still needs to be approved by the federal government. The history of SaskOil gives an interesting glimpse of the history of capitalism in Saskatchewan. During the seventies there was still a powerful movement towards socialism in Saskatchewan as exemplified by the Blakeney government's strong support for a government owned and financed oil development company. By 1986 the trend had turned toward privatization. Even when the NDP returned to power it did not return to the Blakeney nationalization policies. Eventually Sask Oil became part of Nexen a global player in the oil patch but with headquarters in Calgary Alberta.

Now as communist China itself has become a global capitalist player the powers that be see the Nexen takeover as a way for Canada to diversify markets and sources of investment. Of course Saskatchewan will not receive the profits of CNOOC although no doubt it will reap some benefits. First and foremost the Chinese will benefit. However, CNOOC promises that the new company will be listed on the Toronto Stock Exchange so global investors will also participate. I will watch with interest as the Harper Conservative government gives his blessing to a takeover of an Alberta based big oil company to a communist Chinese state owned company!

The takeover may be blocked. The U.S. is none too happy with the takeover. It will be interesting to see what position the Conservative government of Alberta takes. Nevertheless Harper seems to be committed to diversifying markets for Canadian energy resources and also diversifying investment sources. CNOOC has gone to considerable lengths to make the deal attractive for Canada. Another article on SaskOil can be found here.

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