Canada approves energy takeovers by Asia buyers


OTTAWA -- The Canadian government late Friday approved more than $20 billion worth of investment by foreign, government-controlled energy companies in its energy patch, but slammed the door shut on most other big deals in Canada's oil-sands developments by state-owned enterprises.

Canada approved Cnooc Ltd.'s $15.1 billion takeover bid for oil-sands operator Nexen, clearing one of the biggest hurdles for the Beijing-based energy giant in completing what would be China Inc.'s biggest foreign acquisition.

It is also the most ambitious bid by a foreign government-owned entity so far to enter North America's booming energy industry.

The deal, which already has won shareholder approval, still needs US and British government sign-offs, since Nexen has significant assets in those two jurisdictions.

But Friday's decision was Cnooc's biggest - and most closely watched - obstacle. Canada long has welcomed big foreign investment to help it develop its energy and mining resources, but the Cnooc deal triggered a much broader government review because of its size and Cnooc's status as a state-owned enterprise.

Canada also said Friday it had approved the 5.18 billion Canadian dollar (US$5.23 billion) proposed deal by Malaysia's Petronas for Progress Energy. That deal was initially rejected in October, but the government at the time said it would keep the door open to a revised offer from Petronas.

"We are very pleased to have received Industry Canada's approval, which recognizes the long term economic benefits for Calgary, for Alberta, and for Canada in our proposed acquisition of Nexen Inc." Cnooc chairman Wang Yilin said in a statement.

Mr. Barry Jackson, chair of the Board of Nexen, said, "We are pleased that the Government of Canada has recognized the opportunities for Nexen's employees, stakeholders, communities and projects that the proposed transaction with Cnooc will present."

Representatives at the other two companies involved weren't immediately available to comment.

Despite green-lighting these two deals, the government also sent a clear warning signal to other state-owned enterprises, saying that any further deals for Canadian oil-sands assets would be approved only under "exceptional" circumstances, as the government now sees further foreign-government involvement in that sector as no longer of "net benefit" to Canada's economy, its long-time litmus test to approval for foreign deals.

"The government of Canada has determined that foreign-state control of oil sands development has reached the point at which further such [deals] would not be of net benefit to Canada," Prime Minister Stephen Harper said in a statement.

Mr. Harper said the deal approvals shouldn't be seen as the "beginning" of a trend but the "end of a trend."

Dow Jones Newswires

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