What are we really getting when CNOOC buys up a major Canadian player in the energy sector?
by Gillian Steward
Will one of the tallest buildings in Calgary soon be emblazoned with the initials of a Chinese state-owned oil company?
That’s just one of the many questions that hangs over the proposed takeover of Nexen, a major oilsands player, by the China National Offshore Oil Company (CNOOC).
In July CNOOC offered Nexen shareholders a 61-percent premium on the share price. Last week, those shareholders decided it was a deal that they simply couldn’t refuse. It was an important step toward completion of the $15-billion deal, China’s largest overseas acquisition to date.
After the shareholder vote, Nexen’s interim president, Kevin Reinhart, assured the media that CNOOC would be keeping all of Nexen’s 3,000 employees. It has also promised to make Calgary headquarters for all its operations in the Western Hemisphere.
But there are no guarantees that CNOOC will not move in its own executives and staff. It might even want to bring in Chinese workers for its oilsands project in northern Alberta.
As the NDP has pointed out, we still don’t know how the government defines a net benefit to Canada in cases like this.
This is a really big deal in more ways than one. And it is making a lot of people here uneasy, mainly because there are so many unanswered questions. Just last week, Alberta MP Ted Menzies said he is hearing lots of questions and complaints about the deal from constituents.
The Harper government has yet to approve the deal and so far the prime minister hasn’t said much about it publicly. But as the NDP has pointed out, we still don’t know how the government defines a net benefit to Canada in cases like this.
The energy sector is used to multi-million-dollar takeovers. And it is certainly accustomed to foreign ownership. US companies have maintained a strong hand in Alberta’s resource development ever since oil was first discovered here just over 100 years ago.
At one time or another Gulf, Texaco, Chevron and Mobil have all had imposing office towers in the heart of Calgary’s downtown core. BP and Shell have been active in the oilpatch for decades. More recently investors from India to Norway have bought into oilsands development in a big way.
According to Forest Ethics, two-thirds of oilsands production in Canada is owned by foreign companies.
According to a report prepared by Forest Ethics Advocacy , a BC-based conservation group, two-thirds of oilsands production in Canada is owned by foreign companies — an analysis based on shareholder information from more than a dozen companies involved in oilsands development.
Many in the Canadian business sector argue that money is money, that Canada needs foreign investment because we don’t have enough homegrown wealth to develop our resources without it, and as long as foreign investors play by our rules there won’t be a problem. Many oil companies are openly courting Chinese investors.
But the CNOOC takeover is in a different category than most foreign takeovers. China is not a democratic state and its marketplace is not the kind of free market we are used to.
CNOOC is owned and controlled by the Chinese government a.k.a. the Chinese Communist party. There is no distinction between the party and the state in China. There is no distinction between the party and the marketplace. The CPC rules, and can be ruthless when it comes to getting what it wants.
So what are we really getting when CNOOC buys up a major Canadian player in the energy sector? Since presumably it will always have the financial backing of the Chinese government, its activities won’t be curbed by the need to make a profit, as is the case with other players in the marketplace. It will have more than enough resources to tilt the playing field in its favour.
And while Nexen, or whatever CNOOC’s Canadian operation will eventually be called, might still be headquartered here, we all know where its marching orders will come from. How accessible will those party bosses be to government, business and media watchdogs in this country?
It is our oil after all; and our land, water and air that will be used to bring it to market.
Alberta Premier Alison Redford has already made it clear that she welcomes investment from China. And it’s hard to believe that Prime Minister Stephen Harper isn’t salivating at thought of all that Chinese money pouring into the oilsands.
Meanwhile, there are a lot of unanswered questions. And there’s a big black SUV with a CNOOC1 license plate driving around Calgary. I saw it at the airport a few weeks ago.
Looks like CNOOC plans on being here for quite a while.
About Gillian Steward
Gillian Steward is a Calgary writer and journalist, and former managing editor of the Calgary Herald.
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