Alberta is applauding the federal government’s decision to allow the foreign takeover of Nexen Inc. and Progress Energy Resources Corp., but worries Ottawa’s new rules could scare off investment and hurt the value of other oil sands companies.
Premier Alison Redford welcomed the sale of both Calgary-based companies to state-owned foreign energy firms – China’s CNOOC Ltd. and Malaysia’s Petronas, respectively – saying “the benefits are great, and any issues can be mitigated.” Alberta had been lobbying the federal government to approve the deals.
But the province is biting its tongue on Prime Minister Stephen Harper’s other announcement, one that could effectively shut the door on any further oil sands takeovers by state-owned foreign energy companies. Such bids will now only be allowed in “exceptional circumstances.”
“We will, in the coming days, discuss this announcement with the federal government and study the implications of the statements about future investments by state-owned enterprises,” the Alberta Premier said in a statement. “As owners of the oil sands resource, we believe we have a stake in the decisions that affect the development of those resources. We will seek clarity on how ‘exceptional circumstances’ will be defined.”
Intergovernmental Affairs Minister Cal Dallas said Alberta’s not interested in a turf war – it’s in charge of resources, but Ottawa’s in charge of takeovers. However, the province doesn’t see Mr. Harper’s new guidelines as a done deal. Alberta plans to reach out, as a “stakeholder,” once it figures out the impact of the changes, he said.
Foreign investment is critical to the ongoing growth of the oil sands, Mr. Dallas said in an interview. “What’s clear is we will continue to need to attract large amounts of capital into Alberta and into Canada to support the development of the oil sands. We’ll have to, as I said, first see exactly what the language of that policy means,” he said.
Alberta isn’t concerned that Chinese investors, actively wooed by Ms. Redford’s government will be scared off. Instead, Mr. Dallas said he’s waiting for the market’s reaction Monday, suggesting a slump in valuation could be in the offing for other firms if investors now see them as closed to foreign takeover.
“I’m not particularly concerned that we’re going to have a massive negative reaction in terms of China. But I think there’s others possibilities the market will demonstrate to us next week, in terms of what this means as we look at how companies have been valued,” Mr. Dallas said.
Alberta has maintained a staunch doors-open policy when it comes to foreign investment, in part because they say land leases granted to energy companies – foreign or domestic – come with strings attached. “All investors, whether foreign or domestic, private or state-owned, must comply with existing Canadian and Alberta laws if they wish to operate here. Alberta owns, and will continue to own, the natural resources within its borders,” Ms. Redford said.
Mr. Dallas said it was too soon to characterize Alberta as concerned.
“It would be very easy to overreact or overstate. Based on the news conference today, and the material we’ve seen, I think what we want to do is look at the policy in-depth, have some conversation with the federal government, and then we’ll move from there,” he told The Globe and Mail.
Mike Percy, a professor and dean emeritus at the University of Alberta’s School of Business, applauded the federal announcement, saying he doesn’t believe Alberta has much to worry about.
“I thought it was actually a prudently adept decision. It wasn’t retroactively applied, so it kept faith with the signals we’ve sent,” Prof. Percy said in an interview. Since minority interests from foreign companies haven’t been changed, prospective investors abroad may simply change their approach, he said. “In that sense, I don’t see it as posing significant barrier to subsequent capital flows.”
A spokeswoman for Saskatchewan Premier Brad Wall said the province – Western Canada’s other energy giant – would reserve comment over the weekend as it reviews the new rules.