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Gowlings bullish as China shops in oil sands

David Lefebvre

Chris Bolin/CHRIS BOLIN / for The Globe and

For a merger-and-acquisitions lawyer witnessing China's move into the global marketplace for energy, there could hardly have been a better deal. David Lefebvre was right in the middle of the action in the biggest-ever foreign acquisition by a Chinese state-owned enterprise, acting for oil giant Sinopec in its $7.2-billion (U.S.) purchase of Swiss-Canadian Addax Petroleum Corp. in 2009.

But the leading lawyer in Stikeman Elliott LLP's Calgary office, an experienced operator in Chinese business circles, is now making a surprising switch: Mr. Lefebvre is jumping ship to Gowling Lafleur Henderson LLP. He starts next Monday, as the firm aims to build an M&A practice in Calgary and make a push into China with a soon-to-open office in Beijing.

It's a unorthodox move. Stikemans is widely recognized as a whale shark in the Canada's M&A ecosystem, while Gowlings - although one of Canada's largest law firms - is seen as more of a minnow.

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But that is clearly part of the attraction. Mr. Lefebvre, 52, and his new firm's CEO, Scott Jolliffe, say the plan is to develop Gowlings' Calgary office as a "go-to" provider of M&A advice there, while using an on-the-ground presence in Beijing to build a pipeline of oil-and-gas investors from China.

Mr. Lefebvre's move comes as Canadian business law firms continue to wrestle with the question of how to get in on the desire of Chinese state-owned companies to own pieces of Alberta's oil sands and other Canadian natural resources.

How to sign up Chinese clients, and keep them, is a key challenge. Some high-profile Canadian lawyers say, privately, that dealing with Chinese companies can be a challenge. For example, along with the predictable cultural differences and language barriers, China's state-owned oil companies are massive entities, with many officials involved in decision making. Before getting the go-ahead on an acquisition, officials must apply to China's State Council - the equivalent of the country's cabinet - for approval.

Some Canadian lawyers also say the Chinese demand steep discounts on legal fees, discounts that firms swallow in the hopes of getting the inside track on future business.

But Mr. Lefebvre said that was not his experience, insisting that dealing with oil-company investors in Beijing is no different than dealing with those from Houston.

"I don't seem to have the problems that other people purport to have," he said. "For whatever reason, I just really enjoy working with them. And they seem to like working with me."

He credits his success to being in the right place at the right time: the place being Calgary, and the time being the middle of the last decade as China starting shopping worldwide for energy companies. In 2006, he got his big first break, representing China International Trust and Investment Company, or CITIC Group (a Chinese state-owned investment company) in its $1.9-billion acquisition of Nations Energy and its oil field in Kazakhstan.

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Mr. Lefebvre, like other top lawyers working for Chinese entities on oil-patch deals, dismisses the storyline that the Communist country's state-owned companies are proxies for the government, seeking to gobble up Canada's natural resources.

He said China's oil giants - China National Petroleum Corp. (CNPC), China National Offshore Oil Corp. (CNOOC) and China Petroleum & Chemical Corp. (Sinopec) - aspire to be more diversified, like the Western oil business's so-called supermajors, such as Chevron Corp. and Exxon Mobil.

"I work with American companies, Canadian companies, Chinese companies, I don't see any difference with how they operate," he said. "When [Chinese firms]buy into the oil sands right now, there is no way for them to export that oil, really to Asia, so they are buying it on commercial terms."

However, Chinese companies remain cautious about political controversy, especially in the wake of the federal government's surprise rejection of Australian mining giant BHP Billiton Ltd.'s takeover of Potash Corp. of Saskatchewan Inc. last year. (Mr. Lefebvre's former firm, Stikeman Elliott, acted for Potash Corp.).

In countries where the outright purchase of oil fields or other sensitive assets might raise political problems, Mr. Lefebvre said, the Chinese are looking to joint ventures or minority stakes.

"In jurisdictions where there might be more political sensitivity, they are people who don't want to cause political problems," Mr. Lefebvre said. "They are a very consensus-based culture."

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That's another attraction of Gowlings, Mr. Lefebvre said, noting that the firm's well-established government-relations practice in Ottawa could be even more of a key player in future Chinese deals.

"If you're looking to do a deal in a country, you always had to make sure that governments were informed and on-side," Mr. Lefebvre said. "That's just more important today."

In the six years since he started travelling regularly to China, he said, the country has changed at an unrelenting pace. In many ways, it has become easier to do business there, as Chinese companies rapidly adopt Western business practices. But change has had its side effects: Among them, the staggering number of new cars on Beijing's roads.

"I remember you could just leave and go to a meeting," Mr. Lefebvre recalled. "Now, you pull out of the driveway and it takes forever to get anywhere, at any time of day."

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About the Author
Toronto City Hall Reporter

Jeff Gray is The Globe and Mail’s Toronto City Hall reporter. He has worked at The Globe since 1998. From 2010 to 2016, he was the law reporter in Report on Business, covering Bay Street law firms and white-collar crime. He won an honourable mention at the National Magazine Awards for investigative journalism in 2010. More

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