TORONTO, Canada — THE Canadian government announced yesterday it is extending its review period for the proposed US$15.1-billion takeover of Nexen Inc by Chinese state-owned CNOOC, as it needed more time to conduct a "thorough" review of the deal — China's biggest overseas energy acquisition.
Industry Minister Christian Paradis said the review is being extended by 30 days and can be extended again, with the consent of CNOOC.
An initial 45-day review period was set to end Friday.
"The required time will be taken to conduct a thorough and careful review of this proposed investment," Paradis said in a statement.
CNOOC and other big state-owned Chinese energy companies have increased purchases of oil and gas assets in the Americas as part of a global strategy to gain access to resources needed to fuel China's economy. The companies have moved more carefully since CNOOC tried seven years ago to buy Unocal but was rejected by US lawmakers citing national security fears.
The acquisition must be deemed a "net benefit" under Canada's Investment Canada Act. Concerns have been raised by lawmakers about a takeover by a state-owned Chinese firm but the deal has garnered support from the premier of Alberta where Nexen is based. Analysts say it will likely to be approved because more than 70 per cent of Nexen's assets are outside Canada.
Nearly all foreign takeovers are approved in Canada, but the Conservative government did reject Anglo-Australian BHP Billiton's hostile takeover bid for Potash Corp in 2010 and the sale of Vancouver-based MacDonald, Dettwiler and Associates' space-technology division to an American company in 2008.
In the case of Potash Corp, the local Saskatchewan provincial government was against the foreign takeover of a company that controls 25 per cent of the world's supply of potash. A federal election also loomed at the time.
Prime Minister Stephen Harper's government has allowed Chinese companies to take stakes in energy companies and Harper has made trade with China a top priority in recent years.
Nexen, a mid-tier energy company in Canada, operates in western Canada, the Gulf of Mexico, North Sea, Africa and the Middle East, with its biggest reserves in the Canadian oil sands. It produced an average of 213,000 barrels of oil a
day in the second quarter of this year.
Nexen's board approved the takeover in July after CNOOC offered a 62 per cent premium on the stock price. Shareholders voted overwhelming to support the deal last month.
In an apparent show of commitment to Canada's interests, CNOOC is pledging to set up a regional headquarters in Calgary, Alberta, where Nexen is based. It also says it will keep the Canadian company's management and projects in place and list shares on the Canadian bourse in Toronto.