CALGARY - Nexen Inc. began 2012 as a troubled oil and gas company struggling to meet its production targets and appease its shareholders.
It ends the year on the brink of being sold to China's CNOOC Ltd. for $15.1 billion — the Asian superpower's largest-ever overseas foray.
The transaction reverberated beyond Nexen's sleek glass office tower in downtown Calgary, past the pocketbooks of its investors, all the way to Ottawa.
It forced Prime Minister Stephen Harper to weigh whether foreign state-owned enterprises ought to own Canadian resource companies and, if so, which players are welcome and what extent of control is acceptable.
He ultimately decided that SOEs deserve more scrutiny than private ones, and that the oilsands — the third-biggest reserves on the plant — warrant greater protection than other resources.
"Harper was caught a little flat-footed in the sense that I don't think he fully understood both the political reaction to the CNOOC bid and that there might be subsequent bids from state-owned companies coming into the Canadian oilsands," said Queen's University business professor David Detomasi.
Nexen started 2012 in a rough spot. Marvin Romanow made an abrupt exit as CEO in January. The company's flagship Long Lake oilsands project had yet to come close to producing the volume of crude it was designed to, outages at a North Sea offshore platform were causing headaches and Yemen had just booted it out of a major oil project.
Investors' patience was wearing thin.
It would later be revealed that negotiations to sell Nexen to CNOOC began in earnest once Romanow was out the door.
CNOOC was rebuffed twice before Nexen (TSX:NXY), under the leadership of interim CEO Kevin Reinhart, accepted its offer.
But winning over Nexen's board of directors and shareholders would be the least of CNOOC's challenges.
Gordon Houlden, the head of the University of Alberta's China Institute, said the subject would not have been so prickly if it had been France or Norway bidding for Nexen, and not China.
"Certain state enterprises, certain countries, come with more baggage and China is that because of its size, because of its internal complexities, its history, its profile," said Houlden, a former diplomat with postings in China.
On Dec. 7, the CNOOC-Nexen deal was given Ottawa's blessing.
So, too, was the $6-billion acquisition of Progress Energy Resources Corp. (TSX:PRQ) by Malaysia's state oil and gas company. That deal would have been relatively uncontroversial under ordinary circumstances, but it had the misfortune of being announced right before CNOOC and Nexen dropped their bombshell this summer.
The approvals came with a key caveat for future deals — that state control in the oilsands will only be allowed in "exceptional" cases from now on.
The Harper government's handling of the Nexen-CNOOC file was "reactive in nature," said Wenran Jiang, a senior fellow at the Asia Pacific Foundation of Canada.
It's a stance Jiang found curious, given that the Conservatives had for years been actively courting Chinese investment — not the other way around.
CNOOC, having been burned by its unsuccessful bid for U.S. energy company Unocal seven years earlier, was getting the signal that perhaps the conditions were right to try again.
Instead, Ottawa found itself having to navigate around negative public sentiment toward Chinese investment that Jiang sees as largely "misinformed."
"Somehow we're the boy scout and the Chinese are just coming to invite themselves for dinner and then they're ready to roll us over," he said.
"It's not the case at all. We invited them for dinner. We invited them to come and they bought a big dinner ticket and that's why they thought they were coming — for a good party."
By contrast, Jiang praised Liberal leadership candidate Justin Trudeau for arguing in a newspaper column that foreign investment is good for Canada and that the Nexen takeover must go ahead.
It's an approach Jiang would have liked to have seen from Harper.
"You need to make a passionate, positive and proactive case for China needing energy. There's nothing sinister about it."
China is no stranger to Canada's oilpatch. For the past two decades its companies have been gradually building up their presence through joint-venture deals and small-ish acquisitions.
Jiang said it's hard to argue that their track record has been anything but good, but fears that China is up to something nefarious have nonetheless dominated the conversation.
Still, there are concerns that CNOOC's chain of command does ultimately end with communist government in Beijing.
While an ordinary corporation driven by commercial considerations alone would want to sell its oil for the highest price possible, the Alberta Federation of Labour says CNOOC and other Chinese-state-owned outfits are more interested in getting a lower price, so that the Chinese economy benefits.
AFL leader Gil McGowan brought that concern up during a question-and-answer session at a conference on Asian oilpatch investment, held in Calgary on the Monday after the Nexen-CNOOC verdict.
He bristled at the suggestion that anyone who raises those alarms just doesn't understand the issue.
"People who raise these concerns are not immature, we're not jingoistic, we're not xenophobic," he said.
"We're raising legitimate concerns about business ventures which are not business ventures in the way that we understand them."
One of the conference's speakers, the University of British Columbia's Paul Evans, said a more nuanced discussion needs to take place on the matter of what "state-owned" means.
"There's a view that to do business with China means that you are dealing with the Chinese state, and that when you're dealing with the Chinese state, you're dealing with the Chinese Communist Party," he said.
"When you're dealing with the Chinese communist party, you're dealing with a regime and an approach that is repressive on human rights, on espionage, a whole frame of things."
Evans, with UBC's Institute of Asian Research and Liu Institute for Global Issues, asked: "They're state owned but are they state controlled? What does control mean? What are the actual mechanisms for intersections with the Chinese Communist Party?"
There's been minimal hand-wringing within Alberta's oilpatch over what the government's decision will mean for investment going forward.
Provincial Energy Minister Ken Hughes did warn that "there is the potential for less investment coming into oilsands in Alberta and the impact of that is it will simply increase the cost of capital."
But John Zahary, CEO of early-stage oilsands company Sunshine Oilsands Ltd. said that while it's good to have all options on the table, his company will be able to fund growth through equity, debt and joint-ventures.
"We don't need a takeover, and so we don't feel exposed with respect to this decision."
Hal Kvisle, CEO of Talisman Energy Inc. (TSX:TLM), said foreign dollars will continue to flow into Canada through joint-venture partnerships, which he sees as a less disruptive way to do business than building a company only to sell it all to the highest bidder.
And so what if the oilsands have been singled out? There's "all sorts of good stuff going on there" even if all-out takeovers are mostly off the table, Kvisle said.
It's the natural gas players that are hurting right now, and there's no reason to believe they'll stop attracting Asian partners to help build liquefied natural gas facilities, like the one Petronas will be pressing ahead with now that its deal with Progress has closed.
"I think the government has played this brilliantly, actually," said Kvisle. "I think the Harper government deserves full marks for what they've done here."