OTTAWA ? A Chinese state-owned oil giant is being allowed to expand its holdings in Canada?s oilpatch with a $15.1-billion buyout, but Prime Minister Stephen Harper says it won?t happen again.
In a long-awaited decision, the federal government announced CNOOC Ltd., controlled by Beijing, can take over Calgary-based Nexen Inc. in the largest acquisition yet of Canadian oil and gas riches by a Chinese company.
While green-lighting the sale, Harper said the mounting wave of takeovers of Canada?s oilsands by foreign state-owned firms has gone far enough and will not be allowed to continue except in ?exceptional? circumstances.
?To be blunt, Canadians have not spent years reducing the ownership of sectors of the economy by our own governments, only to see them bought and controlled by foreign governments instead,? Harper told the media after the announcement Friday.
?The government?s concern and discomfort for some time has been that very quickly, a series of large-scale controlling transactions by foreign state-owned companies could rapidly transform this (oilsands) industry from one that is essentially a free market to one that is effectively under control of a foreign government.?
MORE:Nexen, Petronas approvals seen as new openness to offshore investment
His tough tone and a series of stricter new guidelines announced Friday for foreign acquisitions of Canadian companies was clearly a response to the political minefield surrounding takeovers of Canadian natural resources by state-owned foreign enterprises, particularly from China.
CNOOC?s proposed acquisition of Nexen touched off widespread opposition among Canadians and caused a split within Harper?s Conservative caucus, with some Tory MPs saying companies controlled by Beijing shouldn?t be allowed to buy up Canada?s oil wealth.
But Harper has linked his government?s economic strategy to increasing trade with Asia and visited China last winter with the message that Canada is open for business. So rejecting CNOOC?s acquisition would have been seen as a slap in the face to the Chinese government and a serious setback in efforts to expand commercial relations.
?These were difficult decisions and there will be more difficult decisions in the future,? Harper said.
The government also announced that Malaysian-owned Petronas? $6 billion buyout of Progress Energy Resources qualifies as being of ?net benefit? to Canada under the Investment Canada Act. That reverses an earlier rejection of that acquisition.
Under the new rules, takeovers of Canadian firms in the oilsands by foreign state-owned enterprises will be approved on only an ?exceptional basis.? The government did not explain what those circumstances would be, saying all decisions on investments are one-off rulings.
While not specifically singling out China, Harper left little doubt that the government is concerned about the role of companies controlled by Beijing. The goals of state-owned enterprises ?may go well beyond the commercial objectives of privately owned companies,? Harper said.
?The Government of Canada has determined that foreign state control of oilsands development has reached the point at which further foreign state control would not be of net benefit,? Harper said.
Over the next four years, the government will increase the threshold for reviews of takeovers by private companies under the Investment Canada Act to $1 billion. However, the threshold for review by state-owned companies will remain $330 million.
The government has been increasingly concerned by the trend of buyouts by foreign state-owned companies, which by 2011 had increased to 20 per cent of all takeovers reviewed by Industry Canada. That?s up from nearly zero in 2008.
In a statement, Industry Canada said such state-owned companies are ?inherently susceptible? to foreign government influences.
NDP MP Peter Julian took aim at the government?s decision, saying it ?rubber-stamped? the takeover and failed to protect the industry from future takeover bids.
?He approved the takeover but said next time we?ll be tougher,? Julian said. ?It was tough talk but actions speak louder than words.?
But John Manley, president of the Canadian Council of Chief Executives, praised Friday?s decisions.
?Based on a preliminary review, it appears that the guidelines introduced today will safeguard the national interest while ensuring that Canadians continue to reap the benefits of a welcoming approach to foreign investment,? Manley said.
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