By The Canadian Press - Monday, December 17, 2012 - 0 Comments
CALGARY – Federal Immigration and Citizenship Minister Jason Kenney is confident that China National…
CALGARY – Federal Immigration and Citizenship Minister Jason Kenney is confident that China National Offshore Oil Co. will follow through with its end of the bargain after the government approved its $15.1-billion takeover of Nexen Inc.
The Harper government approved the foreign takeovers of Nexen (TSX:NXY) by China National Offshore Oil Co., or CNOOC, and Progress Energy Resources Corp. (TSX:PRQ) by Malaysia’s Petronas earlier this month.
At the same time, it updated the rules around such deals.
In the future, all state-owned enterprises seeking to buy large Canadian companies will face greater scrutiny about how they operate and how much control their home governments would have over how they do business.
“We’ve clarified the rules to say that this is the end of a trend…not the beginning of one. We will not permit foreign governments to establish control of Canada’s energy industry and the oilsands in particular,” Kenney said Monday in a year-end interview with reporters in Calgary.
While CNOOC promised to keep Nexen’s head office in Calgary and create more Canadian jobs, other key details of the controversial mega deal aren’t being released.
Kenney didn’t fill in any of the blanks but did say Canada intended to make sure CNOOC abided by the deal that it made.
“This is a challenge for us to ensure that the companies who provided undertakings do actually comply and we’ll do everything we can to ensure that happens,” said Kenney.
“The undertakings that are made by a company in an acquisition like this are a private matter that we’re not at discretion to release publicly,” he said.
“But we will certainly expect that the company respect all of its undertakings. I’ll leave that up to the minister of industry to figure out how that’s applied but we’re confident they’ll be respected.”
CNOOC still has more hoops to jump through before the Nexen deal closes, including U.S. regulatory approval, as Nexen has operations in the Gulf of Mexico.
Kenney said Canada’s involvement in the matter is now over and the government will allow CNOOC to pursue its own approvals south of the border.
He said at this point he doesn’t see the foreign takeover rules being expanded to include joint ventures.
“It depends on the joint venture. If it’s merely a greenfield development where there’s a foreign investor coming in and they are in a minority, non-controlling interest that would probably not be reviewable under the Investment Canada Act,” he said.
“If we see that there is a foreign state-owned company that is clearly tightly controlled by a foreign government and they would have a disproportionately large influence on an industry in Canada like oil and gas, we would be disinclined to approve such an acquisition.”
By Stephen Gordon - Monday, December 10, 2012 at 11:36 AM - 0 Comments
The proper context for thinking about the CNOOC-Nexen and the Petronas-Progress takeovers is what I described here: the real economic story of the oil sands is the investment in physical capital—structures and equipment—that is required before production can even start.
These investment numbers are very, very large. The oft-cited estimate of $650 billion in the next decade should be taken with a grain of salt, because we don’t know the assumptions that went into it. Even so, the fact that the costs of a single oil sands installation is measured in billions of dollars suggests that estimates in the hundreds of billions of dollars are at least plausible. (To give you an idea of how big these numbers are, current Canadian GDP is around $1.8 trillion a year.)
A national accounts identity tells us that all investment expenditures must be financed out of the savings of someone, somewhere:
Investment = Private domestic savings + Public domestic savings + Foreign investors’ savings
Let’s look at each component in turn.
By Stephen Gordon - Monday, October 22, 2012 at 11:53 AM - 0 Comments
The Harper government’s unexpected, last minute (check the time stamp) decision to reject Petronas’ bid for Progress Energy has once again demonstrated that the “net benefit” test for foreign takeovers is without meaning. The government rejected the bid because it felt like it and because it could; there are no other reasons.
The Conservatives appear to be mounting a communications counter-offensive, including this remarkable piece by Globe and Mail columnist John Ibbitson, based on a chat with a mysterious “senior figure in the government, speaking on condition of anonymity.” Here’s the key paragraph:
While ivory-tower economists insist investment is investment, other governments have acted to protect strategic assets from falling into what they consider the wrong hands. The Harper government’s approach has similarly evolved. The door isn’t shut to foreign investment from state-owned companies, the government official said. But those companies must be transparent in their dealings and, to put it bluntly, there must be something in it for Canada: head-office jobs retained, or new money for research and investment, or the like.