Three Conservative MPs wrote to the prime minister and the industry minister to raise concerns about the contentious takeover of Calgary-based oil and gas producer Nexen by a Chinese state-run company, the CBC has learned.
Documents obtained by CBC News Network’s Power & Politics through Access to Information reveal strong opposition to the $15.1 billion deal from key industry people and the Conservative backbenches.
On Aug. 13, 2012, Kitchener, Ont., MP Harold Albrecht wrote to Industry Minister Christian Paradis to register “philosophical and practical opposition” to the takeover by the China National Offshore Oil Corporation (CNOOC).
“As a conservative, I believe in free and fair trade, and a limited role for governments in the economy,” he said. "To allow the China National Offshore Oil Corporation to purchase Nexen would not demonstrate examples of free trade or fair trade."
Albrecht warned that tax dollars could be wasted in the transaction — and that there is no guaranteed access to Chinese markets or “commitment to reciprocity.”
“Worse, this is an example of the most unfair trade possible: expecting job-creating entrepreneurs to compete against the full resources of a global superpower that appears able to flout the disciplines of currency markets and the most basic standards of human rights,” he wrote.
This week, the closing of CNOOC's takeover of the Canadian oil and gas producer was delayed by another 30 days to March 2, 2013. Because Nexen has assets in the Gulf of Mexico, the purchase must be approved by the Committee on Foreign Investment in the U.S.
The documents show that British Columbia MP Russ Hiebert wrote to Prime Minister Stephen Harper on Aug. 15, 2012, calling for changes to the foreign investment law in order to ensure that Canada had an ability to press for human rights reforms. He insisted the bilateral trade relationship as it exists is not working in Canada’s favour.
“I am concerned that our trading and investing relationship with China is one-sided and that an investment proposal of a similar magnitude and nature by a Canadian company in China would simply not be welcomed by the Chinese,” he said.
Harper formally approved the Nexen-CNOOC deal on Dec. 7, 2012, but said the trend of takeovers of Canada’s oilsands by foreign state-owned firms would not continue. He signalled they would be permitted only in “exceptional” circumstances in future.
“To be blunt, Canadians have not spent years reducing the ownership of sectors of the economy by our own governments, only to see them bought and controlled by foreign governments instead,” Harper said at the time.
A third Conservative MP, LaVar Payne of Medicine Hat, Alta., wrote to Paradis Aug. 21, 2012 to raise “grave” concern about the human rights record of China — calling it “far from stellar.”
“It is my belief that Canadian laws must prevail, and that if we were to allow a state-owned company of a foreign nation that brutally represses its own citizens to buy a strategic asset here, we would be setting a very dangerous precedent,” he wrote. He also flagged potential problems with the “lack of environmental concern" by the regime in Beijing.
“I do believe that the Chinese administration has little to no regard for environmental preservation, and this is another area of concern,” he said.
Conservative MPs weren’t the only ones raising red flags.
A confidential letter from Canadian Steel Producers Association president Ron Watkins to Paradis warned the takeover could disrupt supply chain relationships and reduce the potential “net benefits” to Canada. He also raised concerns that procurement practices could favour imports from China.
“This is especially a risk vis-à-vis the Chinese steel industry, which features a very high degree of state ownership or control, and a proven record of WTO [World Trade Organization] -inconsistent product dumping and export subsidies in Canada and elsewhere,” Watkins wrote.
The Canadian Coalition on Human Rights in China, which represents 15 organizations focused on human rights in Canada’s relationship with China, also wrote an extensive letter raising concerns that Canada’s foreign policy position on China puts investment goals ahead of human rights. It called on the Harper government to develop benchmarks and timelines for progress.
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Nexen is a global oil and gas company that produced 207,000 barrels of oil equivalent per day at the end of 2011. In this April 25, 2012 photo, Nexen chief executive Kevin Reinhart addresses the company's annual meeting in Calgary. <em>With files from The Canadian Press</em>
Areas Of Operation
Only about 30 per cent of Nexen's production comes from its Canadian operations, with the rest coming from offshore platforms in the North Sea, Gulf of Mexico and West Africa.
CNOOC Ltd. is China's largest offshore oil and gas producer and is one of the largest oil and gas exploration and production companies in the world. At the end of 2011, it had 909,000 barrels of oil equivalent per day of production. Its Beijing-based parent, China National Offshore Oil Co., operates directly under the State-owned Assets Supervision and Administration Commission of the State Council of the People's Republic of China. CNOOC Ltd. shares trade on Hong Kong and New York stock exchanges.
On July 23, Nexen announced it had accepted CNOOC Ltd.'s all-cash offer of $27.50 per share, worth $15.1 billion. In a circular to shareholders a month later, Nexen revealed it had rejected two earlier CNOOC offers as too low.
61 per cent over Nexen's closing share price on the trading day before the deal.
CNOOC and Nexen had a relationship well before they announced their deal. In 2011, CNOOC acquired Opti Canada Inc., Nexen's beleaguered partner in the Long Lake oilsands project and the two have been working together on that project since. Later in 2011, CNOOC and Nexen formed a joint venture in the Gulf of Mexico. Around the same time, Nexen also agreed to sell a 40 per cent interest in some of its northeastern B.C. shale natural gas lands to a Japanese-led consortium.
Progress Energy Resources Corp. (TSX:PRQ) is a mid-sized natural gas producer with daily production of about 50,000 barrels of oil equivalent per day.
Areas Of Operation
Progress is the largest landholder in the Montney shale in northwestern Alberta and northeastern B.C. It is also active in Alberta's Deep Basin.
Petroliam Nasional Bhd, or Petronas, is wholly owned by the government of Malaysia. It has assets and interests in more than 30 countries and is heavily involved in the liquefied natural gas, or LNG, business.
Progress announced in late June it had agreed to Petronas' $20.45-per-share takeover offer. A month later, the Malaysian state-owned company sweetened its offer to $22 per share in order to trump a rival bid, bringing the deal's total value to $6 billion.
The sweetened offer is worth double what Progress shares traded at the day before the initial takeover deal was announced.
In mid-2011, Progress and Petronas formed a 50-50 partnership to jointly develop the some of the Canadian company's land in the north Montney. The two companies are also partnering on a liquefied natural gas terminal near Prince Rupert, B.C., that will be 60 per cent bigger if the takeover deal