Challenges for CNOOC following approved takeover of Nexen

TORONTO - The Canadian government approved China National Offshore Oil Corp's (CNOOC) $15.1-billion takeover of gas producer Nexen Inc Friday, but it's just one of many hurdles the Chinese state-owned oil giant will have to face, said analysts.

Prime Minister Stephen Harper said after months of debate that they will be allowing CNOOC to take over the Calgary-based Nexen.

Being the largest overseas investment by a Chinese company, and the largest foreign investment in Canada since 2008, Harper's decision came under close scrutiny by both Canadians and Chinese investors.

Calling this a "difficult decision," Harper told a press conference that the deal represented a significant opportunity for Canada, and it was up to them as a government to weigh the benefits and risks when such an opportunity emerged.

"I think Canadians understand that China is a very large economy. In fact, in the not-so-distant future, China is going to be the largest economy in the world and therefore represents significant opportunities for Canadians," he said, adding that Canadians hope the government to take advantage of the opportunities without exposing to the risks.

The deal, announced in July, sparked a heated debate within the Conservative cabinet for months, mainly about where Canada needs to draw the line when it comes to foreign investments in the country's natural resources.

Chinese Commerce Minister Chen Deming called on Canadian authorities to be "fair and objective" when analyzing acquisitions by Chinese state-owned firms during his visit to Canada in September. While he did not specifically mention the deal in his speech, he did say that the country's state-owned corporations, including CNOOC, do not operate any differently than privately-owned companies.

Giving the deal a green light, Harper also announced a number of new and stricter guidelines for foreign acquisitions of Canadian companies to send out a message that Canada's natural resources - namely the lucrative oilsands - won't be overtaken by state-owned enterprises that may have goals beyond the commercial objectives.

"When we say Canada is open for business, we do not mean that Canada is for sale to foreign governments," he said.

Wenran Jiang, special advisor to the Alberta Department of Energy, says Harper is performing a "balancing act."

"Harper clearly caved into pressure ... although he announced the approval, he also put on a stop for future takeovers of such deals," said Jiang. "Harper and the government would not make a fool of themselves after heavily courting Asian and Chinese investments."