Canada Approves CNOOC, Petronas Takeovers of Nexen, Progress Energy
On December 9, Bloomberg reported that the Canadian Prime Minister Stephen Harper gave the green light to the C$15.1 billion (£9.5 billion) takeover of the Calgary-based Nexen (TSE:NXY) by Chinese energy producer CNOOC Ltd (HKG:0883, NYSE:CEO), the largest-ever foreign acquisition by a Chinese company. In addition, the Canadian government approved the bid of the Malaysian state oil company Petroliam Nasional Bhd (Petronas) for the Toronto-listed gas producer Progress Energy Resources Corp (TSE:PRQ).
**Canada Approves China’s Biggest Takeover Ever**
Canada’s approval of the Nexen takeover will see the Beijing-backed CNOOC take a stake in Canada’s largest oil sands project and the biggest position in the Buzzard oil field in the UK North Sea. In addition, Nexen also has oil production in Yemen as well as in the Gulf of Mexico. The Financial Times reports that the Canadian government ruled that CNOOC’s acquisition of the Canadian oil company was “likely to be of net benefit to Canada”.
“I express my appreciation for Canada’s welcome of our investment,” noted Wang Yilin, chairman of CNOOC, as quoted by Bloomberg, adding that the deal recognised “the long-term economic benefits for Calgary, for Alberta and for Canada”. The C$15.1 billion deal which is reportedly the largest-ever foreign acquisition by a Chinese company is part of China’s efforts to secure global reserves to feed demand in the world’s second largest economy.
Bloomberg quotes the Canadian industry minister Christian Paradis as saying that Canada won “significant undertakings” for governance, transparency, disclosure, and compliance from CNOOC. Mr Paradis also noted that CNOOC made promises involving the management of Nexen and that the Beijing-backed company would have to report back to the Industry Ministry to ensure that conditions are being met.
!m[The Chinese State-Backed Company Makes Transparency Pledge ](/uploads/story/999/thumbs/pic1_inline.png)Some analysts, however, doubt whether CNOOC’s transparency commitment will represent a sea change in Chinese business practices, with Reuters quoting Robert Lewis, a partner at Zhong Lun law firm as saying that while there will be efforts from foreign governments to get more information, it is “still a question of how far China is willing to give.”
The CNOOC-Nexen deal however is still subject to approval by the Committee on Foreign Investment in the United States (CFIUS), since Nexen’s US unit has gas blocks in the Gulf of Mexico.
**Petronas Expects Canadian LNG Exports by 2018**
In addition to the CNOOC-Nexen deal, the Canadian government also gave the green light to the takeover of the Toronto-listed Progress Energy by the Malaysian Petronas after having previously blocked the takeover.
“We’re obviously quite pleased with the decision,” noted Michael Culbert, CEO of Progress Energy, as quoted by Bloomberg. “We know that this has been a difficult decision to make and we don’t take that lightly.”
The takeover will let Petronas build a liquefied natural gas (LNG) facility on Canada’s west coast to meet demand from Asian customers. Reuters reports that the Malaysian company expects to begin LNG exports by 2018, with the export facility receiving a final investment decision in late 2014. “The acquisition will enable Petronas to secure long-term strategic gas resources and leverage on Progress’ extensive experience in unconventional resource development,” both companies said in a statement.
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