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.

Harper government reviewing CNOOC takeover bid for Nexen

The Canadian Industry Minister Christian Paradis has confirmed the review has started of China National Offshore Oil Company's $15.1 billion takeover deal with Calgary-based Nexen Inc.

On Wednesday Paradis said in an e-mail::

"I can now confirm that CNOOC has filed an application for review of its proposed acquisition of Nexen under the Investment Canada Act and I am conducting a review of the proposed investment,"

During the initial period the review will take 45 days but the period can be extended if more time is required. The review must decide if the takeover is of net benefit to Canada. CNOOC has already promised as part of the deal that Calgary would be the headquarters of its North and Central American operations and will keep all of Nexen's employees and management. This along with an attractive price for Nexen shareholders will no doubt help to show a net benefit to Canada. The price offered per share was over 60 per cent higher than the price at which shares were trading the day before the deal.

If the deal is approved this would be the largest ever Chinese foreign acquisition. Foreign takeovers are seldom rejected but during the six years it has been in power two takeovers were rejected the largest being the U.S. 40 billion bid of the Anglo-Australian mining giant BHP Billiton for Potash Corp. The Saskatchewan government was strongly opposed to the deal.

Some politicians in the U.S.have objected to the Nexen deal including Senator Charles Schumer who wants to hold up the deal to pressure China on trade policies. Nexen holds dozens of U.S. oil leases in the Gulf of Mexico. In fact many of Nexen's holdings are outside Canada.

An article by Greg Weston shows that the Conservative government faces growing concerns among some that the large takeover would open the door for a shopping spree for other Canadian energy resources. China has ample funds and a huge appetite for energy resources.

Weston asks how the Conservative can say yes to Nexen and perhaps no to the next deal with the Chinese. Personally I fail to see the problem. Cases are decided on their individual merits. All sorts of U.S. takeovers have been approved but one was disapproved by the Conservative government because it was thought not to be a net benefit of Canada. Decisions are not precedents for future decisions and hence the shopping spree argument is not really cogent.

Weston points out that if the Chinese were allowed to takeover Canadian Oil Sands they would then have majority control of Syncrude which is a consortium that has received billions in Canadian tax dollars and produces about 15 per cent of Canada's total oil consumption. There is something a bit odd about this worry about foreign ownership. If foreign ownership is a worry Canada is a bit late. The Canadian Association of Petroleum Producers estimates that two-thirds of the oil sands are already controlled by foreigners.

Harper has been in China inviting the Chinese to invest some of their ample capital in Canada. They are now doing so and with attractive terms for Nexen a company whose balance sheet was far from attractive and faces many development problems.

Harper wants international investors to see his government as open to business. Polls show that Canadians are uncomfortable with a major Canadian oil company being sold to the Chinese. The Conservative Alberta government however also supports the deal and there has been no significant public outcry against the sale as there was when Potash Corp. in Saskatchewan was threatened with a foreign takeover.

There likely will be more attempts by China to acquire or purchase interests in other Canadian companies. Each move will simply have to pass the test of benefit to Canada. It is quite possible that some future deals will be blocked on the grounds they give too much control of our resources to a foreign country and the deal is not a net benefit to Canada.

Stephen Harper and Jean Charest fight on behalf of asbestos industry

Even though there is plenty of evidence of the health risks of asbestos our Conservative Prime Minister Stephen Harper and Quebec Liberal Premier Jean Charest have been trying to have two Quebec mines reopen to export even more of the material to countries such as India and Indonesia.In those countries working with the asbestos often brings misery or even death to poor workers. The asbestos is a known cause of a type of lung cancer.

Prime Minister Stephen Harper has supported the industry and in particular Christian Paradis a Conservative MP who represents a riding that contains Canada's last two remaining asbestos mines. The mines are both closed at present. Paradis wants them re-opened.

Paradis dismisses the evidence of international health experts on the matter. Many Canadian miners suffered from ailments caused by contact with asbestos and many died as a result. To show his support for Paradis Harper promoted him to Industry Minister.

The Liberal provincial government of Jean Charest went even further and approved a 58 million dollar loan to help open the mines if another 25 million will be put up by private investors. In spite of optimistic announcements that the money is forthcoming the negative reaction to the idea of reopening the mines may have frightened investors away.

The health agencies in Quebec, the national Canadian Labour Congress, the CNTU all oppose opening the mines. The Quebec Federation of Labour supports the re-opening although many of its individual unions have opposed this For much more see this Globe and Mail article.