OTTAWA - The same day shareholders of a Calgary-based energy company agreed to a takeover bid by a state firm from China, Canada's spy agency is warning such purchases can pose a threat to national security.

In its latest annual report, the Canadian Security Intelligence Service says the majority of foreign investment in Canada is carried out in an open and transparent manner.

However, certain state-owned enterprises and private firms "with close ties to their home governments have pursued opaque agendas or received clandestine intelligence support for their pursuits here."

The CSIS report for 2010-11, tabled in Parliament on Thursday, says that when companies with links to foreign intelligence agencies or hostile governments try to acquire control over strategic sectors of the Canadian economy, it can represent a threat to security interests.

The spy service's report came just as shareholders of oil-and-gas company Nexen Inc. solidly voted to support the high-profile takeover by the China National Offshore Oil Co., a dealt that still requires federal approval.

Two years ago, CSIS director Dick Fadden made headlines by openly speaking of provincial cabinet members and municipal politicians coming under foreign influence. Though Fadden was cagey about the alleged foreign interference, he broadly suggested that China posed concerns.

While it does not name specific countries or companies, the newly released CSIS report says foreign entities involved in takeovers might try to exploit newfound control in an effort to make illegal transfers of technology "or to engage in other espionage and other foreign interference activities."

"CSIS expects that national security concerns related to foreign investment in Canada will continue to materialize, owing to the increasingly prominent role that (state-owned enterprises) are playing in the economic strategies of some foreign governments."

The report says CSIS continued in 2010-11 to investigate foreign interference — the attempt by governments or their agents to clandestinely influence Canadian policies and opinions, or to spy on and intimidate diaspora groups in Canada.

"Foreign interference is particularly nefarious because it can have the effect of disrupting the multicultural harmony that is central to Canadian identity," CSIS says.

The spy service report underscores other threats to Canada, including cyberattacks, the proliferation of weapons of mass destruction and the lingering possibility of terrorist attacks in the post-9-11 era.

It notes that in January 2011 online attackers targeted the networks of the Finance Department and Treasury Board. "Unfortunately attacks like this are not a rare exception. The government of Canada is now witnessing serious attempts to penetrate its networks on a daily basis."

The main target of cyberspies is the aerospace and high-technology industry, with the oil-and-gas business and universities involved in research and development also eliciting interest, CSIS says. "From the attackers' perspective, it is significantly cheaper and often less difficult to steal research than to develop it."

In addition to pilfering intellectual property, state-sponsored attackers are also seeking information that would give them an advantage, such as inside knowledge of coming negotiations and the personalities involved, the report says.

"Foreign intelligence agencies use the Internet to conduct espionage operations, as this is a relatively low-cost and low-risk way to obtain classified, proprietary or other sensitive information."

The danger of nuclear proliferation remains acute, says the spy agency, singling out the activities of Iran and North Korea as particularly worrisome.

CSIS also points out that terrorist groups have pursued the means to use biological agents or improvised radiological explosives known as "dirty bombs."

"While the technological hurdles to such efforts remain significant, the possibility that a terrorist group could acquire crude capabilities of this kind cannot be discounted."

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  • 10. Encana

    Brand value: $418 million Photo: Doug Suttles, president and CEO of Encana Natural Gas (The Canadian Press) Source: <a href="http://www.brandfinance.com/offices/canada" target="_hplink">Brand Finance Canada</a>

  • 9. Canadian Natural Resources

    Brand value: $702 million Source: <a href="http://www.brandfinance.com/offices/canada" target="_hplink">Brand Finance Canada</a>

  • 8. Syncrude

    Brand value: $933 million Source: <a href="http://www.brandfinance.com/offices/canada" target="_hplink">Brand Finance Canada</a>

  • 7. Suncor

    Brand value: $936 million Source: <a href="http://www.brandfinance.com/offices/canada" target="_hplink">Brand Finance Canada</a>

  • 6. Cenovus

    Brand value: $1.109 billion Photo: Brian Ferguson, president and CEO of Cenovus Energy (The Canadian Press) Source: <a href="http://www.brandfinance.com/offices/canada" target="_hplink">Brand Finance Canada</a>

  • 5. TransCanada

    Brand value: $1.47 billion Source: <a href="http://www.brandfinance.com/offices/canada" target="_hplink">Brand Finance Canada</a>

  • 4. Husky

    Brand value: $1.607 billion Source: <a href="http://www.brandfinance.com/offices/canada" target="_hplink">Brand Finance Canada</a>

  • 3. Petro-Canada

    Brand value: $1.831 billion Source: <a href="http://www.brandfinance.com/offices/canada" target="_hplink">Brand Finance Canada</a>

  • 2. Esso (Imperial Oil)

    Brand value: $1.849 billion Source: <a href="http://www.brandfinance.com/offices/canada" target="_hplink">Brand Finance Canada</a>

  • 1. Enbridge

    Brand value: $4.726 billion Source: <a href="http://www.brandfinance.com/offices/canada" target="_hplink">Brand Finance Canada</a>


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  • 10. Oil And Gas Accounts For 4.8 Per Cent Of GDP

    The oil and gas industries accounted for around $65 billion of economic activity in Canada annually in recent years, or slightly less than 5 per cent of GDP. Source: <a href="http://www.ceri.ca/docs/2010-10-05CERIOilandGasReport.pdf" target="_hplink">Canada Energy Research Institute</a>

  • 9. Oil Exports Have Grown Tenfold Since 1980

    Canada exported some 12,000 cubic metres of oil per day in 1980. By 2010, that number had grown to 112,000 cubic metres daily. Source: <a href="http://membernet.capp.ca/SHB/Sheet.asp?SectionID=9&SheetID=224" target="_hplink">Canadian Association of Petroleum Producers</a>

  • 8. Refining Didn't Grow At All As Exports Boomed

    Canada refined 300,000 cubic metres daily in 1980; in 2010, that number was slightly down, to 291,000, even though exports of oil had grown tenfold in that time. Source: <a href="http://membernet.capp.ca/SHB/Sheet.asp?SectionID=7&SheetID=104" target="_hplink">Canadian Association of Petroleum Producers</a>

  • 7. 97 Per Cent Of Oil Exports Go To The U.S.

    Despite talk by the federal government that it wants to open Asian markets to Canadian oil, the vast majority of exports still go to the United States -- 97 per cent as of 2009. Source: <a href="http://www.nrcan.gc.ca/statistics-facts/energy/895" target="_hplink">Natural Resources Canada</a>

  • 6. Canada Has World's 2nd-Largest Proven Oil Reserves

    Canada's proven reserves of 175 billion barrels of oil -- the vast majority of it trapped in the oil sands -- is the second-largest oil stash in the world, after Saudi Arabia's 267 billion. Source: <a href="http://www.ogj.com/index.html" target="_hplink">Oil & Gas Journal</a>

  • 5. Two-Thirds Of Oil Sands Bitumen Goes To U.S.

    One-third of Canada's oil sands bitumen stays in the country, and is refined into gasoline, heating oil and diesel. Source: <a href="http://www.nrcan.gc.ca/statistics-facts/energy/895" target="_hplink">Natural Resources Canada</a>

  • 4. Alberta Is Two-Thirds Of The Industry

    Despite its reputation as the undisputed centre of Canada's oil industry, Alberta accounts for only two-thirds of energy production. British Columbia and Saskatchewan are the second and third-largest producers. Source: <a href="http://www.nrcan.gc.ca/statistics-facts/energy/895" target="_hplink">Natural Resources Canada</a>

  • 3. Alberta Will Reap $1.2 Trillion From Oil Sands

    Alberta' government <a href="http://www.huffingtonpost.ca/2012/03/27/alberta-oil-sands-royalties-ceri_n_1382640.html" target="_hplink">will reap $1.2 trillion in royalties from the oil sands over the next 35 years</a>, according to the Canadian Energy Research Institute.

  • 2. Canadian Oil Consumption Has Stayed Flat

    Thanks to improvements in energy efficiency, and a weakening of the country's manufacturing base, oil consumption in Canada has had virtually no net change in 30 years. Consumption went from 287,000 cubic metres daily in 1980 to 260,000 cubic metres daily in 2010. Source: Source: <a href="http://membernet.capp.ca/SHB/Sheet.asp?SectionID=6&SheetID=99" target="_hplink">Canadian Association of Petroleum Producers</a>

  • 1. 250,000 Jobs.. Plus Many More?

    The National Energy Board says oil and gas employs 257,000 people in Canada, not including gas station employees. And the Canadian Association of Petroleum Producers says the oil sands alone <a href="http://www.capp.ca/aboutUs/mediaCentre/NewsReleases/Pages/OilsandsaCanadianjobcreator.aspx" target="_hplink">will grow from 75,000 jobs to 905,000 jobs by 2035</a> -- assuming, of course, the price of oil holds up.