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A Nexen rig in the Gulf of Mexico

Dave Olecko/Nexen

CNOOC Ltd. is facing new delays in its effort to close its proposed $15.1-billion acquisition of Calgary-based Nexen Inc., after a deadline for U.S. approval of the transfer of Nexen's Gulf of Mexico assets expired without a decision.

To complete its proposed takeover, the Chinese state-owned company needs the approval by the Committee on Foreign Investment in the United States – an inter-agency group led by the Treasury Department that must determine whether a proposed deal represents a threat to U.S. security. The agency has 75 days to rule on a deal, but that deadline has passed and CNOOC has had to pull its application and refile, Nexen said in a statement Tuesday evening.

Although the "pull and refile" process is routine for complicated takeovers, Nexen shares fell more than 2 per cent to $24.10 in heavy trading in Toronto and New York on Tuesday as investors debated the impact of the delay.

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CNOOC and Nexen announced the deal in late July but it has faced a rocky road, with political opposition in both Canada and the United States and deadline extensions in Ottawa as well as in Washington. Investment Canada now has until Dec. 10 to rule on the deal, though a further extension is possible.

Several members of the U.S. Congress have urged the Obama administration to block CNOOC's acquisition of Nexen's properties in the Gulf, which account for about 12 per cent of the company's production.

However, traders remain optimistic that CNOOC will win approval for the U.S. part of the deal, given that Nexen is a minority partner and non-operator in most of its U.S. offshore projects.

The company might be forced to divest some properties, including a number of leases that were subject to an generous incentive program that virtually eliminates royalty payments on any production.

In Ottawa, Investment Canada officials continue to consult with CNOOC on a range of commitments, from employment levels, to guarantees of Canadian participation in management, to spending on charities and other corporate social responsibility.

The federal government is also reviewing a $6-billion bid by Malaysia's Petronas to acquire Progress Energy Corp. It is expected to announce decisions on the two deals along with the release of clearer foreign investment guidelines on state-owned companies that want to acquire Canadian resource companies.

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