Say yes to CNOOC, then sort out ‘net benefit’ – by Tom Flanagan (Globe and Mail – September 27, 2012)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Tom Flanagan is professor of political science at the University of Calgary and a campaign manager for conservative political parties.

The attempt by the Chinese National Offshore Oil Corp. (CNOOC) to purchase Nexen Inc. has many attractive features. CNOOC already has a Calgary office and a track record of managing almost $3-billion worth of Canadian energy assets. Although the Chinese government is the majority owner, CNOOC stock is listed in Hong Kong and New York, and the company has independent directors as well as those representing the Chinese government.

This friendly bid, incorporating a hefty premium on the stock price, has been approved by both the directors and shareholders of Nexen. CNOOC is promising to retain Nexen’s staff, as well as the Calgary head office, and to start listing its shares on the Toronto Stock Exchange.

No issue of military technology, of the kind that derailed a U.S. company’s attempted acquisition of MacDonald Dettwiler and Associates Ltd. in 2008, is involved here. And there is no provincial opposition, such as killed BHP’s attempt to buy the Potash Corp. of Saskatchewan in 2010. (The government of Alberta has been sending supportive signals.) Nor has there been any public opposition from the energy industry to the Nexen deal, although there is some concern about the possibility of repeated acquisitions in the future.

Is it, therefore, automatic that Industry Minister Christian Paradis will announce approval after conducting the review required by the Investment Canada Act? Not really. The government can impose conditions, and thus may wish to get more detailed written guarantees of some of CNOOC’s promises, such as maintaining a Canadian head office and employment.

More ominously, political opposition seems to be growing. Some critics are fearful of China’s sometimes troubling role in world politics – supporting North Korea, shielding Iran in its nuclear weapons adventure, quarreling with Japan over the Senkaku/Diaoyu Islands. Yet, it would be hard for China to use CNOOC’s ownership position in Canada to affect our foreign policy and relations with our allies.

For the rest of this column, please go to the Globe and Mail website: http://www.theglobeandmail.com/commentary/say-yes-to-cnooc-then-sort-out-net-benefit/article4560550/

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