(EnergyAsia, December 10 2012, Monday) — Against the tide of Canadian public opinion, the government has approved the separate purchases of two Calgary, Alberta-based upstream companies by China’s CNOOC Ltd and Malaysia’s Petronas for a total of more than C$20 billion. (US$1=C$0.99).

After months of agonising debate, Prime Minister Stephen Harper surprised the market with his late Friday announcement for the two deals at the same time setting new rules for future takeovers of Canadian firms by private and state-owned companies.

CNOOC Ltd will acquire Nexen Inc for C$15 billion, making it the biggest international acquisition by a Chinese firm while Petronas will pay C$5.9 billion for Progress Energy underlining the growing Asian interest in Canada’s oilsands.

But in acknowledgement of popular sentiments against the two deals, Mr Harper drew a line that his government would make it extremely difficult for companies owned and controlled by foreign governments to acquire Canada’s oil assets in future. They would face tougher questions not only about their plans but also scrutiny over their operations and the degree of control exercised by their governments. The industry minister would also be given additional powers to extend the deadline to conduct national security over proposed deals involving foreign state-owned companies exceeding C$330 million in value.

At a late press conference last Friday, Mr Harper said: “When we say that Canada is open for business, we do not mean that Canada is for sale to foreign governments. 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 industry from one that is essentially a free market to one that is effectively under control of a foreign government.”

While the CNOOC and Petronas deals are friendly in nature, Canadians have responded with fear that Asian governments will exercise increasing control over their country’s economy and natural resources.

Both companies have pledged to retain their Canadian management and staff as well as inject much needed investments to build up the operations of the acquired companies.

Canada needs as much as C$650 billion over the next decade to develop its oil and gas resources, and the money will come largely from foreign investors, said Natural Resources Minister Joe Oliver.

Businesses along with shareholders of Nexen and Progress Energy welcome the approvals.

John Manley, President and CEO of the Canadian Council of Chief Executives (CCCE) said the approvals send a positive signal to investors that Canada welcomes foreign investment because “it is good for our economy, good for job creation and increases competition, which in turn strengthens productivity.

“Canada’s population is small relative to those of the other major advanced economies, and we have a tremendous need for capital to develop our industrial base and achieve our potential as a leading exporter of energy and advanced energy technologies. At the same time, companies looking to invest in Canada must play by our rules and respect our values, adhering to Canadian laws, regulations, and environmental and labour standards.”

CNOOC Ltd said the approval recognises the long-term economic benefits of the acquisition for Alberta, and for Canada.

Barry Jackson, Nexen Inc’s chairman, said the Chinese firm has agreed to undertake the following:

– Establish Calgary as the head office of its North and Central American operations, responsible for approximately US$8 billion of additional assets;

– Seek to retain Nexen’s current management team and employees;

– Invest significant capital as a long-term commitment to the development of oil and gas resources in Canada;

– List its shares on the Toronto Stock Echange (TSX);

– Build upon Nexen’s existing and highly regarded community and charitable programs, particularly with respect to First Nations and local communities;

– Continue to support oil sands research at Alberta universities and to participate in the Canada’s Oil Sands Innovation Alliance (COSIA), and

– Provide a compliance report related to its undertakings annually to Industry Canada.