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CNOOC-Nexen deal encounters trouble
Gary Park For Petroleum News
The proposed blockbuster takeover of Canada’s Nexen by China’s CNOOC is entangled in a web being woven by a leading U.S. lawmaker and securities regulators.
Top-ranking Democratic Senator Charles Schumer of New York wants the Obama administration to use the $15.1 billion deal as leverage to solve long-standing trade and investment issues with China.
Compounding that challenge the U.S. Securities and Exchange Commission has obtained a court order to freeze the assets of traders using accounts in Hong Kong and Singapore, alleging they pocketed more than $13 million by trading in advance of the acquisition announcement on July 23.
The SEC alleges that Hong Kong-based firm Well Advantage Ltd. and other unknown traders bought shares of Nexen based on confidential information ahead of the deal.
Schumer in a letter to Treasury Secretary Timothy Geithner, who also chairs the inter-agency Committee on Foreign Investment in the U.S., said that although he does not oppose the takeover of Nexen’s global assets on its merits the U.S. should not pass up an opportunity to apply pressure on China to open up its markets and treat trading partners equally.
The bulk of Nexen’s assets are tied up in Alberta’s oil sands and British Columbia’s shale gas plays. About 10 percent of the value is assigned to the U.S. Gulf of Mexico, with other properties held in West Africa and the United Kingdom’s North Sea.
Multiple approvals required The deal needs approval from regulators in Canada, the U.S., China and possibly the European Union.
“It is rare that we have so much leverage to exert upon China,” Schumer wrote. “We should not let this window of opportunity pass us by.”
He was one of the most vocal critics of CNOOC’s proposed merger in 2005 with Unocal, a deal which fell apart under political pressure.
The purchase of U.S. assets by state-controlled foreign companies can be blocked on national security grounds.
Like Canadian regulators, a division of the U.S. Treasury Department has the power to impose conditions on foreign acquisitions.
“At some point, we have to put our foot down over China’s refusal to play by the rules of free trade,” said Schumer.
He argued China should be forced to join a government procurement agreement, simplify its review system for foreign investments in China and step up enforcement of intellectual property infringements.
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