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‘Security’ bill no threat to energy deals Canadian government lacks ability to review transactions; says focus of legislation on defense technology, military hardware Gary Park Petroleum News Canadian Correspondent
At the same time U.S. lawmakers are grappling with the strategic and security worries of China’s drive to lock up scarce global oil supplies, the Canadian government has tabled legislation that would require a probe of any foreign investment seen as potentially “injurious to national security.”
In the midst of a firestorm over the threatened purchase of Unocal by the Chinese National Overseas Oil Co., CNOOC, the Liberal government of Prime Minister Paul Martin quietly introduced a bill giving itself explicit authority to review and block foreign transactions.
But Industry Minister David Emerson said the proposed amendment to investment review law was not a signal that foreign investments in the “natural resources sector” were unwelcome.
He said Bill C-59 was not an attempt to shut off major Canadian companies from foreigners.
The emphasis, Emerson said, was a concern about the transfer of sensitive defense technology and military hardware in the wake of 9/11. Petroleum News Canadian Correspondent Although a 2004 bid by state-owned China Minmetals to take over mining giant Noranda eventually fell through, it did alert the federal government that Canada — unlike other Group of Eight countries — did not have the ability to review a transaction.
But he would not go into greater detail on what might constitute an investment “injurious to national security.”
Until this year, the greatest anxiety over foreign incursions into Canada’s petroleum industry have focused on U.S.-based companies, which have at times controlled more than 60 percent of Canada’s production, prompting the Canadian government in the 1970s to impose stringent reviews of takeovers.
Those restrictions no longer exist and over recent years U.S. companies have pulled back from most of the assets they acquired at premium prices in the 1990s.
The only turnaround occurred in the second week of July when Texas-based Pogo Producing forked over US$1.8 billion for the Canadian holdings of Unocal — the first acquisition of a Canadian oil and gas producer in the four years since Devon Energy took over Anderson Exploration. Concern over China’s investments Now that concerns about excessive U.S. influence on the Canadian industry have evaporated, attention has shifted to the arrival of the Chinese, with CNOOC and Sinopec both taking stakes in start-up oil sands producers and PetroChina hoping to become the anchor tenant on Enbridge’s proposed Gateway oil sands pipelines.
But there could be much larger issues looming.
Having apparently been thwarted in its bidding war with Chevron for Unocal, CNOOC is now rumored to have its eye on Talisman Energy, even though the Canadian independent does not have any interests in the oil sands, where the Chinese apparently think future value lies.
A move on Talisman would probably stir the same anxieties that had U.S. political leaders demanding that the Chinese government should allow takeovers of its state-controlled energy industry before it could gain a foothold in the U.S.
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