Canada OKs CNOOC's $15b purchase of Nexen

Canadian regulators on Friday approved China National Offshore Oil Corp's $15.1 billion purchase of Calgary-based Nexen Inc, which explores western Canada's oil-rich tar sands and operates production rigs in the North Sea, the Gulf of Mexico and Nigerian waters.

CNOOC, China's biggest offshore oil producer, announced the planned acquisition in July, and Nexen shareholders overwhelmingly approved it two months later. It is believed to be the most valuable acquisition of a foreign company by a Chinese enterprise.

Friday's ruling follows months of debate in Canada over a Chinese State-controlled company gaining access to strategic energy resources. Sporadic reports said Canadian officials had expressed skepticism about the proposed Nexen takeover, which they stressed could be approved only if it provided a "net benefit" to Canada.

The deal is still undergoing a regulatory review in the United States, regarding Nexen's assets in the Gulf of Mexico. On Nov 27, the two companies announced the withdrawal and resubmission, with changes, of an application to the Committee on Foreign Investment in the US, a panel representing several federal agencies in Washington that reviews sensitive transactions, often for national-security reasons.

"CNOOC has satisfied me that, under existing guidelines, their proposed transaction to acquire control of Nexen is likely to be of net benefit to Canada," Industry Minister Christian Paridis said in a statement.

"To demonstrate that the transaction is likely to be of net benefit," he said, "CNOOC has made significant commitments to Canada in the areas of: governance, including commitments on transparency and disclosure; commercial orientation, including an adherence to Canadian laws and practices as well as free-market principles; and employment and capital investments, which demonstrate a long-term commitment to the development of the Canadian economy.

Paradis said CNOOC will submit to his ministry an annual report on the company's compliance with those standards.

The government, however, emphasized the limited scope of its approval of the CNOOC deal and a related decision Friday to green-light the purchase of natural gas producer Progress Energy Resources Corp by Malaysia's state-owned oil and gas giant Petronas. Regulators in Ottawa had ruled against the proposed transaction in October.

"When we say that Canada is 'open for business', we are not saying Canada is up for sale to foreign governments," Prime Minister Stephen Harper said at a news conference following the Industry Ministry's announcement.

In line with Harper's sentiment, the ministry also said Friday that future decisions would be subject to strict new rules on investment in Canada by government-owned foreign companies. (A delay in drafting the revisions had been cited as the reason for holding up a decision on the Nexen acquisition.)

CNOOC has said it will absorb about $4.3 billion in Nexen's debt as part of the deal.

The Chinese company has for years signaled its desire to buy energy assets abroad. It attempted to acquire US-based Unocal Corp in 2005 for $18.5 billion but later abandoned that bid under pressure from political leaders in Washington citing national-security concerns.

In 2011, Nexen and Beijing-based CNOOC jointly invested $2 billion to develop oil sands on Alberta's Long Lake, a partnership that set the stage for the takeover. CNOOC's first investment in Canada was a 17 percent stake in oil sands developer MEG Energy Inc in 2005.

The Nexen deal raises CNOOC's proven reserves by 30 percent, the company has said. It currently has about nine years' worth of proven reserves based on current production.