Skip to main content

Nexen shale gas rigs. China’s CNOOC Ltd. has offered $15.1-billion (U.S.) to buy Calgary-based Nexen.

David Olecko/Nexen

A number of foreign companies are flocking to Canada's oil patch in search of acquisitions and investments as Ottawa weighs the $15.1-billion takeover of energy company Nexen Inc. by China's CNOOC Ltd.

While it is not unusual for companies to circle the oil patch, interviews with a dozen industry sources and deal makers over a month have revealed a picture of an industry set for a massive influx of foreign capital while the window to foreign investment remains open.

Industry executives and advisers say offshore buyers are currently in discussions or touring the operations of a wide variety of Canadian oil sands, conventional petroleum, natural gas, oil service and refining operations.

Story continues below advertisement

Some of these potential acquirers include state-owned entities such as Korea National Oil Corp. (KNOC) and others from China, Malaysia and Kuwait, sources said. A handful of private-sector oil and gas giants are also on the hunt, including France-based Total SA. Joining these suitors is a new class of Asian buyers believed to include privately held Chinese companies and one of China's largest cities, Tsingtao.

The takeover interest has been sparked by a combination of recent declines in oil and gas prices and a perception in some international circles that Canada favours foreign investment to help finance production, particularly in the oil sands, where the cost of development is expected to crest $100-billion over the next decade.

"If you think Nexen is something of a big deal, you ain't seen anything yet," said Wenran Jiang, a special adviser to Alberta's Department of Energy on Asian energy markets. "The new trend is large-scale Chinese private capital that will come into the Canadian market."

A wide variety of international acquirers are looking for investments in the oil patch. France's Total has been searching for – and making – oil sands deals for a few years. According to people close to the Nexen negotiations, Total was a bidder for the Calgary company, but stepped out of the race after CNOOC tabled an offer with a rich premium of more than 60 per cent above the Calgary company's stock price. Sources said Total is still seeking a Canadian acquisition. A spokesperson for the company did not return calls.

State-owned KNOC is also on the hunt for a multibillion-dollar acquisition to expand its holdings in the oil sands, according to sources. Its search comes three years after it acquired Harvest Energy Trust in 2009 for $4.1-billion. A Calgary-based official with KNOC said he was unaware of any acquisition plans.

Kuwait confirmed earlier this month that its state-owned petroleum company has a preliminary deal to invest close to $4-billion in an oil sands joint venture with Athabasca Oil Corp. People familiar with talks said a final pact is not expected for weeks.

One of the more curious potential investors is Tsingtao, China's seventh-largest city with a population of nearly nine million, which is best known for its Tsingtao Brewery. The port city has a long history of international trade and investment and, acccording to sources, it has expressed an interest in acquiring a Canadian company with conventional petroleum assets.

Story continues below advertisement

Although Tsingtao and a handful of state-owned entities such as Sinochem Group are believed to be interested in Canadian investments, people familiar with their plans said it is unlikely any will make a move until Ottawa completes its review of the Nexen takeover proposal.

CNOOC's proposed takeover of Nexen, which was overwhelmingly approved by its shareholders Thursday, marks the largest foreign takeover ever attempted by a Chinese state-owned entity and the first time that the country has sought full control of a major Canadian company.

The scale of the bid has put pressure on the federal government to tighten its policies towards state-owned acquirers.

On Thursday, Canada's spy agency heightened concerns by warning that foreign investment by unnamed state-linked organizations could threaten national security. In a report tabled to Parliament, CSIS said foreign-controlled entities could use Canadian takeovers to engage in "espionage and other foreign interference activities.

Political opposition to CNOOC's planned purchase of Nexen, which holds the bulk of its assets outside Canada, has been muted. Ottawa is expected to complete a review of the deal's benefits within two months. Deal makers said the prospect of tighter foreign takeover rules has created a sense of urgency with some buyers.

"There has been a bit of a rush to get deals done. They want to get in now and get the first mover advantage in case the rules change," said one adviser.

Story continues below advertisement

– With a report from The Canadian Press

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter
To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies