Ottawa Further Extends Review Period of CNOOC-Nexen Deal

The Canadian government has extended the review period of a $15.18 billion bid by China National Offshore Oil Corporation (CNOOC) for Canadian energy producer Nexen by a month to Dec 10, 2012.

Ottawa's announced its decision in a published statement on Nov 2, 2012. The Canadian government had said earlier it would extend its review of CNOOC's planned takeover of Nexen by 30 days, suggesting that a further extension of the review period was in the cards.

"Extensions to the review period are not unusual," Canada's Industry Minister Christian Paradis said in the statement.

"The [Investment Canada] Act provides an initial 45 days for the review, which can be extended for an additional 30 days. The review period may be extended again by the Minister, with the consent of the investor. A decision can be made at any time within this period," Paradis explained.

"The proposed transaction is undergoing a rigorous review under the Investment Canada Act. A determination will be made based on the six clear factors that are laid out in detail in section 20 of the Act and the Guidelines on Investment by State-Owned Enterprises," Paradis added.

There are industry watchers who are of the view that the Canadian government's decision to block the takeover of Progress Energy Resources by Malaysia's Petronas illustrates the rising global trend of resource nationalism and increases the likelihood that CNOOC's attempt to acquire Nexen could also face resistance. 

Fitch Ratings' Director of Energy & Utilities Asia Pacific Sajal Kishore told Rigzone in an Oct. 23 interview, that while CNOOC had done appropriate groundwork to cultivate local support, the company could find itself in a situation where it has to further sweeten its offer in terms of ensuring that sufficient profits remain in Canada, as well as give a stronger guarantee on keeping local jobs.

CNOOC's commitment to keep local jobs will be especially important in this proposed deal, given the fact that several Chinese companies have been criticized through widespread media reports for having poor relations with their workforces in regions such as Africa and Latin America.

To date, CNOOC has pledged to make Calgary the headquarters for its North American operations, list its shares on the Toronto Stock Exchange and keep current Nexen employees.


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