Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

The Nexen building is seen in downtown Calgary, Alberta, July 23, 2012.


China's CNOOC Ltd. believes it is poised to win Canada's go-ahead for the $15.1-billion purchase of oil producer Nexen Inc, after talks with provincial leaders boosted its confidence that Canada values China as an investor in its huge oil sands sector and as a future energy customer, sources said.

CNOOC's proposed acquisition is raising worries inside Canada's federal cabinet, where some are wary of letting a Chinese state-owned enterprise buy up domestic assets. Some Canadian newspapers also published polls recently showing that a majority of Canadians surveyed opposed the sale – fuelling concerns among investors that the deal might be blocked.

Shares of Nexen have been trading well below CNOOC's $27.50 per share offer, a 61 per cent premium to the price of Nexen shares before the bid, due to concerns that public opposition will convince the government to block the deal. It closed at $24.91 in Toronto on Wednesday.

Story continues below advertisement

But in a sign that Ottawa would likely approve the deal, a delegation of Canadian provincial leaders held meetings with CNOOC in Beijing earlier this month and none of the Canadian premiers voiced concern about the proposed deal, sources familiar with the meetings told Reuters.

CNOOC Chief Executive Officer Li Fanrong told the premiers – who do not sit on the committee reviewing the CNOOC bid but are believed to be highly influential in the review process – that the deal had been structured to meet Canadian regulations and benefit Canada as well, the sources said.

"Mr. Li did a very good job in his meeting with premiers, trying to demonstrate that CNOOC was not interested in extracting resources but they are there to be part of the community, to benefit Canadians," one of the sources said.

Asked whether any of the premiers expressed support for the deal, he said: "I think you may not hear a premier stand up and say: This is a great deal for Canada. But what's most important is nobody stands up and says this is a bad deal for Canada. So I think this will be approved."

CNOOC, which has won approval from Nexen shareholders for the acquisition, has promised to retain all Nexen employees and make Calgary its headquarters for its Americas operations. It will also pursue a secondary listing of its shares in Toronto.

The other source, a senior Chinese oil industry executive with direct knowledge of the matter, said CNOOC had "candid exchanges" on the acquisition with the Canadian premiers and CNOOC views their support as important for the deal.

The Canadian officials, including Alison Redford, premier of Alberta where Nexen is based and where most of Canada's oil sands are located, were in Beijing to promote Chinese investment in Canada's natural resource, education and agricultural sectors. Ms. Redford has voiced support for the deal.

Story continues below advertisement

The second source said CNOOC had anticipated a potential negative reaction from Canada before it launched the Nexen bid. Industry analysts expect Ottawa to make a final decision on the bid around end-November.

CNOOC declined to comment.

The deal, if completed, would mark China's largest ever overseas acquisition and the first outright takeover of a large Canadian energy producer by a Chinese state-owned enterprise. Canadian industry ministry officials are looking closely at the bid to determine whether it is of net benefit to Canada.

If the deal is rejected, it would stop Chinese companies from pursuing any large acquisitions of resources assets in Canada and it may also hurt trade between the two countries, analysts and investment bankers say.

Canada's ruling Conservative Party is split over the deal, leaving Prime Minister Stephen Harper with a difficult final call to make.

But industry watchers expect that Harper will support the deal, given his efforts to court China as a major investor in Canada and his eagerness to diversify energy exports away from the United States, and that the federal government will fall in line with his decision.

Story continues below advertisement

Mr. Harper has visited Beijing twice to encourage Chinese investment in Canada and made clear that Canada was open to business deals.

CNOOC and other Chinese companies, including Chinese state oil giants PetroChina and Sinopec Group – parent of Asia's largest refiner Sinopec Corp – have poured more than $18-billion into Canadian oil sands properties, mostly buying minority stakes in projects operated by other firms.

Canada needs $630-billion of foreign investment in the energy patch over the next decade alone.

Mr. Harper might use the CNOOC-Nexen deal to help Canada gain wider access to the Chinese market for its services and goods, analysts and bankers say.

"I think it gets approved, but the decision goes right to the wire and Canada uses it to leverage stuff out of the Chinese," said Simon Powell, Head of Asian Oil and Gas Research at CLSA.

"It's hard to see them not approving it but then again they did reject the BHP bid for Potash," he said, referring to BHP Billiton Ltd's $39-billion bid for Canadian company Potash Corp in 2010.

Story continues below advertisement

In his meeting with Canadian premiers, CNOOC's Li made the case that the Nexen deal is different from the Potash case, and that CNOOC is among numerous state-owned firms, such as Petronas Nasional Bhd, Total SA and Statoil, with investments in Canada's energy industry, the source said.

Potash Corp. held 40 per cent of the world's potash supply, whereas Nexen, which operates in Canada, the Gulf of Mexico, the North Sea and elsewhere, owns a fraction of Canada's oil sands. Brad Wall, premier of the western Canadian province of Saskatchewan, led a high-profile and dogged campaign against the Potash takeover and played a major role in having it scuppered, analysts pointed out.

"It is going to go ahead," said a senior investment banker who is not involved in the deal. "Nexen is not the most strategic asset in Canada. It is not like they are giving up their crown jewel."

Report an error
Tickers mentioned in this story
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 If you want to write a letter to the editor, please forward to

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 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 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 ...

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