The federal government is not rushing to rule on whether state-owned foreign companies can buy Canadian resources without comprehensive examinations, even with a key deadline on the horizon.
Ed Fast, Minister for International Trade and for the Asia-Pacific Gateway, said he expects Ottawa to clarify the so-called net benefit test “very soon.” Foreign companies must prove their acquisitions will benefit Canada to obtain approval for proposed takeovers of domestic companies with assets of more than $312-million. Industry Minister Christian Paradis is currently reviewing two major deals involving state-controlled companies out of Asia.
“I would say this: With respect to the Chinese, Canadians expect us to exercise a high level of due diligence in our dealings with our trade partners, especially where state-owned enterprises are concerned. I would hope that the Chinese also understand how important this is to Canada that we get it right,” Mr. Fast said in an interview Thursday. “I’m committed to getting it right and I know that the Industry Minister is committed to getting it right. … Our government is committed to getting it right. But we will not be pushed or hurried into making these kinds of decisions.”
China’s CNOOC Ltd. wants to buy Nexen Inc. for $15.1-billion (U.S.), while Malaysia’s Petronas has struck a $6-billion takeover deal with Progress Energy Resources Corp. Both deals are in limbo as Ottawa refines its net benefit rules, although the government’s forthcoming clarifications will affect far more than the two deals.
State-owned companies in Asia, which have the cash to fund growth in Canada’s energy sector in a way domestic companies cannot, are hungry for assets in western Canada. If the rules are too restrictive, however, they may stay away. This could chill international trade, as well as slow growth in the oil sands and expensive unconventional gas plays. North American natural gas prices are stagnant, but Canada has the potential to develop a liquefied natural gas market if the capital is available.
Mr. Fast said the timing for clarifying the net benefit rules depends “solely” on Mr. Paradis, although he expects an announcement soon. “Our government will be coming out with clarifications on the guidelines we apply and I expect that is going to happen very soon,” Mr. Fast said.
Asked whether details could come next week, he added: “Maybe.” The government, however, has been promising to clarify the rules for months. On Oct. 22, Prime Minister Stephen Harper, for example, said there would be news in the “not-too-distant” future.
Petronas and Progress had expected the government to approve their union without difficulty. Mr. Paradis, however, rejected the deal when the review period ended on Oct. 19, although sources say he was left no option after Petronas refused to extend the deadline. Petronas’s executives then quickly went to Ottawa to negotiate – they had another 30 days to sway Mr. Paradis – and Reuters and the Wall Street Journal reported Friday the Malaysian company submitted a modified bid about two weeks ago. The review period can be extended again should both sides agree. The current examination period expires around Monday. (Investment Canada will not clarify when the 30-day clock started ticking and what happens if the expiration date falls on the weekend, as it appears to. Progress said that is confidential.)
Greg Kist, Progress’s vice-president of marketing, corporate and government relations, would not say whether Petronas has submitted a revised offer to Ottawa, noting the company does not have standing on the file.
“I could certainly point you to back to what Petronas indicated before – in their last news release – that it would be making additional submissions after having met with Industry Canada officials and obviously meetings have happened,” he said.
CNOOC and Nexen’s next review deadline is Monday, Dec. 10, although that can be extended, too.