Last Friday, after months of deliberation, the Canadian government finally approved two major energy acquisitions.
China National Offshore Oil Corporation’s (CNOOC) (NYSE: CEO) will be allowed to move ahead with its $15 billion takeover of Canadian company Nexen (TSX: NXY), and Malaysian state-owned Petronas has been approved to acquire Progress Energy Resources (TSX: PRQ) for $5 billion.
The government did note, however, that such deals may not be approved going forward.
Canadian Prime Minister Stephen Harper has sought to create markets for Canadian energy exports. At present, the country is heavily dependent on the U.S. market. But since the Keystone XL project remains stuck, Harper has reached out to China to facilitate exports.
Most of the worries over CNOOC/Nexen stems from the fact that CNOOC is so heavily connected to the Chinese state apparatus.
From the New York Times:
“Canadians generally, and investors specifically, should understand that these decisions are not the beginning of a trend, but rather the end of a trend,” Mr. Harper said at a news conference. “When we say that Canada is open for business, we do not mean that Canada is for sale to foreign governments.”
That, of course, could create a confusing situation for China, which may in the future face roadblocks in its path toward developing energy relationships abroad. China has recently been acquiring natural resource properties all over the world—in North America, Africa, Venezuela, and so on.
As far as Nexen goes, CNOOC has said it will retain current management and situate its North and Central American headquarters in Calgary, Alberta.
Although the Albertan oil sands have gained major attention lately, heavy investment is required to really start developing these rich resources. It may prove difficult for Canada to resist such offers, even if they do come from the Chinese government.