|
Snuffing dragon’s fire Canada urged to entrench limits on oil takeovers by Chinese state-owned enterprises Gary Park For Petroleum News
The Canadian government should not back down and redraw its line-in-the-sand that blocks takeovers of oil sands companies by foreign state-owned enterprises or SOEs, said new research.
The University of Calgary School of Public Policy has bolstered the view of many Canadians that Chinese oil companies are run by handpicked individuals from the Communist Party, which has a single-minded goal of serving Beijing and its global expansion ambitions.
The paper by economist Duanjie Chen, a research fellow at the school who was born in China, said the SOEs are unlike government corporations in Canada because they pay no heed to market principles.
She said that when the government granted approval last December for the takeover of Nexen by China National Offshore Oil Corp., CNOOC, it was emphatic that the transaction would end moves by Chinese SOEs to gain controlling interests in major Canadian energy firms, limiting purchases to minority stakes.
“This is how it should be,” Chen said. “Canada’s business sector should contribute to market-driven economic growth through efficient management and upright corporate behavior.
“It should not be allowed to become an instrument in China’s distorted and often disreputable drive toward global hegemony.”
Sales dry up The aftermath of the CNOOC-Nexen deal was a sudden drying up of complete oil sands asset sales by Marathon Oil, ConocoPhillips, Murphy Oil and Athabasca Oil.
Chen said she is not opposed to all investment from China, provided the government sticks to its policy of minority holdings.
On the free trade front, she said China should be prepared to meet Canada’s expectations allowing Canadian companies to acquire majority stakes in Chinese strategic industries — but she doubts that will ever happen.
In an ideal world, she said corporate takeovers should be restricted to firms that share the same values and follow similar principles of corporate governance.
“Basically what I’m saying is I don’t trust (foreign SOEs),” Chen said, noting that Chinese SOEs have made spectacular growth over the past 20 years that was “unrivalled by virtually any sector on Earth.”
She said that trend was fueled by the free real estate and access to capital made available by the Chinese government, estimating that if the SOEs had paid rent for using public land and natural resources, their average real return on equity would have been below zero for the 2001-09 period, instead of the officially reported rate of return of 8.2 percent.
CNOOC most westernized Chen said CNOOC is the most westernized of China’s top three oil companies and has a mandate to chase control of foreign resources to strengthen China’s national security.
She said CNOOC has almost 100,000 employees and produces 909,000 barrels per day of oil, compared with Suncor Energy, Canada’s leading producer, at 600,000 barrels of oil equivalent per day and a payroll of 13,000.
The school published a paper entitled Dancing with the Dragon last fall by anthropologist Josephine Smart who warned that investing in China poses risks for Canadian investors who not understand the rules applied in a nominally Communist country.
Zhang Junsai, China’s ambassador to Canada, has insisted that SOEs based their investment decisions on profit and business potential, while Yuen Pau Woo of the Asia-Pacific Foundation accused Chen of taking an “alarmist” approach, arguing Canada should treat all foreign companies operating in Canada equally.
Woo said he was sure there are examples of malfeasance by Chinese SOEs, just as there are in the private sector.
To date, CNOOC, PetroChina and Sinopec have invested about C$30 billion in Canadian oil and gas assets, raising concerns about how those entities will operate given the importance to Canadians of royalties and taxes.
However, Barclays Capital said in a June report that Chinese companies are ramping up spending in the oil sands, while Canadian companies are pulling back.
| 