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Nearly a year ago, Prime Minister Stephen Harper declared that he would not hand Canada's energy treasure wholesale to entities run by foreign governments. Apparently, some were already starting to question how much Canadian energy they really wanted and at what cost.

The Conservative government approved the multibillion-dollar takeovers of Nexen Inc. by China's CNOOC Ltd. and Progress Energy Resources by Petronas of Malaysia last December, following months of nail-biting scrutiny of the deals.

Mr. Harper drew his line in the oil sands, effectively barring future bids for control of bitumen bounties by state-owned enterprises, or SOEs. "Canadians have not spent years reducing the ownership of sectors of the economy by our own governments, only to see them bought and controlled by foreign governments instead," he said then.

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The tightened restrictions have worked so far, but as many in the investment industry would argue, too well. Since that time there haven't even been bids by SOEs for minority oil sands stakes, and no deals above the $330-million Investment Canada review threshold for other energy resources either.

The chill that descended following Mr. Harper's edict is often attributed to uncertainty among would-be buyers about whether a transaction could meet the government's murky test of net benefit to the country and an even more inscrutable review of national security implications.

But there's another factor at play that could be more troublesome as Canada insists it is still open for business: "A sharper pencil," as one Calgary investment banker calls it. Some foreign investors that have laid down big bets have found it's not easy to make money in the Canadian oil business.

Development and operating costs are high compared with many jurisdictions around the world. Oil pipeline transport constraints persist. Bitumen prices are wildly volatile. Natural gas markets often fail to offer break-even prices for the fuel.

It's a big reality check for foreign players. The pockets of national oil companies, especially those in Asia, had appeared bottomless. Economies were growing at breakneck speed and required oil and gas to fuel the expansion. Governments directed SOEs to find resources wherever available, and Canada was a prime target.

Short-term returns were not an issue for the state-owned firms, the theory went.

Take South Korea. Its Korea National Oil Corp. racked up $2.3-billion of acquisitions in Canada in 2009 and 2010. It bought Harvest Energy, a mostly conventional oil and gas producer that also owned the country's easternmost refinery at Come By Chance, Nf ld.

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Now, with a new government in place at home demanding quality, and not just quantity, in energy assets, the company's being forced to closely consider returns on capital, and losses at the Harvest Operations unit have mounted.

Reports early last month suggested officials in Seoul were mulling a sale of the whole operation, although Canadian representatives have said it's just non-core assets on the block. KNOC hired Deutsche Bank to market the refinery, the Wall Street Journal reported. Given the plant's location and its reliance on costly imported oil, it could be a tough sell.

This week, the CEO of Korea Gas Corp. said at a global energy conference that the company was mulling the sale of up to half its interest in the planned LNG Canada project on the West Coast.

The pencil sharpener has also been spinning at Taqa North, the subsidiary of the Abu Dhabi National Energy Co., which had shelled out $7.5-billion for Canadian assets, many of them producing dry gas. Properties are now on the block as part of a months-long reorganization that has included cuts of as many as 100 jobs, according to a Calgary Herald report.

Buyers have become sellers, which in a way is being true to one of the tenets of Canada's foreign investment rules, that oil companies operate as businesses rather than shady strategic arms of foreign governments.

The problem for the industry as large domestic players such as Talisman Energy Inc. and Encana Corp. look to slim down is that the SOEs are now adding to an already-large pool of assets on the block in an environment where buyers – especially foreign ones – aren't buying much.

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