Sunday, October 21, 2012

Canadian government rejects Petronas takeover bid for Progress Energy

Industry Minister Christian Paradis, announced on Friday that the $5.2 billion offer by Malaysian state-owned oil company Petronas for Calgary-based Progress Energy Resources, had not met Canada's "net benefit test" and therefore will not be approved.
In his statement Paradis said:
"I can confirm that I have sent a notice letter to Petronas indicating that I am not satisfied that the proposed investment is likely to be of net benefit to Canada. Due to the strict confidentiality provisions of the [Investment Canada] Act, I cannot comment further on this investment at this time,."
Petronas will have 30 days to make additional representation and to add further undertakings that might alter the decision. After that period, Paradis will confirm his first decision or approve the deal.
Paradis said that Canada had a long-standing reputation for welcoming foreign investment. I just wonder if there is not some static coming from the U.S. about the Harper government welcoming Asian state-owned energy companies investing in Canada. Through NAFTA, the U.S. has special claims on Canadian energy resources. The U.S.may object to Petronas taking over a Canadian energy company. Paradis says that Canada remains committed to an open climate for foreign investment in Canada.
The specific aspects of NAFTA related to oil and gas exports to the U.S. can be found at this government site. The Council of Canadians has often criticized the arrangements: “NAFTA prevents us from selling our energy resources at rates lower than we sell them in the U.S. We also can’t ever cut back on the proportion of energy we produce and sell to the United States, even in times when our country runs short.”
The decision on Petronas comes as the Harper government is also reviewing a takeover bid by CNOOC, a Chinese state-owned oil company. The $15.1 billion takeover bid is for Calgary-based Nexxen Inc. Paradis announced on Oct. 11 that he had extended that review for thirty days and might even extend it further.
The recent nationalistic noise by Canadian opposition parties about foreign investment is a bit bizarre since much production is already foreign owned. Any national oil policy died with the Trudeau Liberal government and no one, at least in Alberta, is crying over that!
Oil sands production, just to give an example, is already 71% foreign owned. As I see it, the real debate is to what extent Canada is going to remain bound up with its relationship of prime supplier to the U.S. and a safe source of supply for the giant oil consuming economy to the south. Debate about this is taboo, as far as most public discussion is concerned. Public discussion is about how dangerous it is to Canada's security etc. that we have state-owned entities owning our oil resources, and, in particular, the security risk of dealing with Chinese companies. Apparently, there is no security risk to Canada in being required not to cut back on the proportion of energy we produce and sell to the U.S. if we suffer a shortage.
I have included a news report by Iranian Press TV. While the suggestion of a national state owned oil company proposed in the interviews is certainly a good idea IMHO, the reality is that there is almost no significant public demand for this in Canada. Our supposedly socialist NDP is busy complaining about the Chinese takeover bid for Nexxen but it is not asking for the government to takeover Nexxen, as that would be much too radical a move.

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