Asian companies looking to acquire Canadian oil and gas producers are running into a wall of resource nationalism, according to a new survey that shows Canadians believe the country’s resource endowment represents a strategic asset that requires federal protection.
Those public attitudes underscore the difficult political challenges facing the federal government as it assesses whether CNOOC Ltd.’s bid for Nexen Inc. and Petronas’s proposed takeover of Progress Energy Resources Corp. represent a “net benefit” to Canada.
The Abacus Data Inc. poll, done for the Canadian American Business Council, found that 67 per cent of Canadians oppose companies from China buying domestically controlled natural resource companies, with similar levels of resistance to firms from Russia and India. And 87 per cent of respondents agreed that natural resources are a “strategic national asset” that requires special protection from Ottawa over who can control them.
“What the survey shows us is that this protectionist steak over our natural resources is not confined specifically to worry about China; we see it with Russia, we see it with India.” said David Coletto, chief executive officer of Abacus, which surveyed 1,066 Canadians.
“There is a large segment of the population that has a gut reaction to the idea of foreign interests buying up our resource companies. It rubs them the wrong way.”
Only 33 per cent of respondents supported the idea of U.S. companies buying Canadian resource firms, despite the long history of such cross-border investment.
Another survey released Tuesday by Forum Research found that 72 per cent of respondents oppose CNOOC’s acquisition of Calgary-based Nexen, which has production in the U.S. Gulf of Mexico, the U.K.’s North sea and Alberta’s oil sands.
Most Canadians do not oppose the influx of foreign investment to help develop the country’s resources, the surveys find. But they appear to differentiate between takeovers of operating companies and joint ventures with the foreign ownership in a minority stake or outside investment that develops greenfield sites.
Ottawa is in the latter stages of reviewing the proposed CNOOC and Petronas deals, and is expected to release its decisions either late this month or early in December, along with a new foreign investment framework that will strengthen requirements for state-owned enterprises to demonstrate that they operate as commercial entities, and possible limits to acquisitions by SOEs from individual countries.
Industry analysts expect the federal government to approve both transactions, while extracting commitments from the acquirers on investment and employment. Alberta Premier Allison Redford has spoken in favour of such takeovers so long as they include firm undertakings, saying the province needs foreign investment to develop its oil and gas resources. Liberal leadership hopeful Justin Trudeau also endorsed the CNOOC deal this week, while the New Democrats – who make up the official opposition in Ottawa – oppose it.
But Mr. Coletto said the federal government has some work to do to persuade Canadians that takeovers by Chinese and Malaysian state-owned companies will benefit the country.
“I think it is a challenge for the government to manage public opinion on this issue, while at the same time they’ve got the economic interests at heart and the need for that kind of investment and capital,” the pollster said.
In the House of Commons on Tuesday, Prime Minister Stephen Harper said the government welcomes foreign investment but will judge each deal on its merits.
“We think Canadians expect us to examine these investments carefully and make sure they are in the best interests of Canada,” he said.
Proponents of the CNOOC deal argue that, not only does it bring much-needed capital to Nexen, but it represents an important signal to China that Canada is keen to pursue greater trade and investment ties between the two countries.
In a speech in Ottawa on Tuesday, Bank of Nova Scotia economist Patricia Mohr said China represents the most important customer for Canada’s resource sector. The booming Asian country already accounts for 44 per cent of the world’s demand for four key base metals: copper, zinc, nickel and aluminum. And it is poised to experience a dramatic increase in energy consumption while the United States – Canada’s current sole export market – is expected to reduce its demand for imported oil and gas.
While she suggested Canada should welcome Chinese investment, Ms. Mohr remains concerned about the lack of reciprocity. “Canadian investment to China is extremely limited,” she said. “I would like to see a balancing of that.”
Ottawa and Beijing have signed a foreign investment protection and promotion agreement, or FIPA. That deal does not commit China to open its market to new Canadian investment but merely provides some recourse when companies operating there feel they have been unfairly treated.