Today Prime Minister Stephen Harper announced the approval of two major acquisitions of Canadian energy companies by foreign state-owned enterprises. The Chinese National Offshore Oil Company (CNOOC) will commence the $15.1 billion takeover of Nexen Inc., a Canadian company with major holdings in the Alberta tar sands. Malaysia's Petronas will proceed with the purchase of Progress Energy Resources Corp., a Calgary company with considerable shale gas plays in British Columbia, for $5.2 billion. Petronas has plans to construct an $11 billion liquified natural gas plant in Prince Rupert to prepare gas exports for Asia.
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Prime Minister Harper announced the takeovers, which are steeped in controversy, in tandem with new takeover guidelines intended to address growing concerns of foreign ownership of Canada's resources by energy-hungry nations. He remained silent on the significance of the approval for FIPA, the Foreign Investment Protection and Promotion Agreement, also known as the China-Canada Investment Treaty.
“Canadians generally and investors specifically should understand that these decisions are not the beginning of a trend but rather the end of a trend,” said Mr. Harper. The full meaning of that statement, however, remains to be seen. The Harper government's decision to ratify FIPA may mean deals done with China, like today's deal with CNOOC, will carry a new significance.
The government previously raised the threshold for official review of foreign takeovers from $330 million to $1 billion, signaling open arms to potential foreign investors with an eye on mega projects like the Alberta tar sands. However, today that threshold was returned to $330 million for state-owned enterprises.
“To be blunt, Canadians have not spent years reducing ownership of sectors of the economy by our own governments only to see them bought and controlled by foreign governments instead,” Mr. Harper said.