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The friendly $15.1 billion bid by CNOOC Ltd for the Canadian energy company Nexen Inc gels with the Canadian government's pleas for foreign money to develop its costly oil sands of northern Alberta, according to industry experts, giving it a very definite chance of winning approval.
Reacting to what is likely to become China's largest overseas acquisition to date, the Canadian government has said only that it would review the bid by CNOOC based on its laws on foreign investment.
But lawyers, analysts and insiders say there are good reasons for the deal to go ahead, and few reasons to block it.
"It so far appears to be a mutual two-way street," said Oliver Borgers of law firm McCarthy Terault LLP in Toronto.
"Canada has made it clear that it is looking for Chinese investment ... And China is now in a way reciprocating that interest by investing in a Canadian company.
"It appears to want to do a lot for that Canadian company in terms of increasing its size, its footprint, its presence globally, all of the things that would be music to the ears of the Canadian government."
Approval of the deal would help restore a Canadian foreign investment climate that the government dented in 2010 when it rejected a $39 billion attempt by Australian miner BHP Billiton Ltd to buy fertilizer maker Potash Corp.
The Conservative government said the Potash takeover would not bring a net benefit to Canada and vetoed the deal.
But Potash Corp was a huge player - and a big employer - in the politically significant province of Saskatchewan, while Nexen's assets are far more widely distributed around the world.
Unlike the Potash offer, in which Saskatchewan's premier voiced strong opposition, contributing to its demise, Nexen's home base of Alberta appeared enthused by CNOOC's play for the company, saying its oil sands assets require major investments.
"Today's potential transaction is further evidence of the vital importance of Alberta's oil sands to meet global energy demand," said Alberta Energy Minister Ken Hughes in a statement.
"Foreign investment benefits Albertans, and Canadians, putting Canadian firms in a better position to compete globally."
One Toronto-based legal expert on foreign investment laws said CNOOC is making all the right noises by saying it is going to keep jobs in Canada, make Calgary one of its international headquarters and list on the Toronto Stock Exchange.
"This makes the political climate a little easier," said the expert, who asked not to be named. "On the BHP deal, I'm not sure there was enough forethought given to the political landscape."
Nexen is active in Colombia, Yemen, the North Sea and the United States as well as in Canada, and the majority of its production and cash flow come from outside Canada.
"This is a friendly deal ... there is a great deal of forethought given to the kind of presence in Canada that the government is seeking," added a source close to the deal.
"The (Canadian) government tends to look for generation of economic activity in these deals. If that's the gauge - generation of activity and development - then this is a pretty compelling proposition."
Canadian Prime Minister Stephen Harper went to Beijing in February, partly in a bid to sell Canadian oil to China, and he stressed the need to diversify markets and reduce reliance on the US.
Without foreign money, development of the oil sands would lag, the Canadian government says.
Even so, Chinese investment in Canadian energy firms is sensitive politically.
The deal is subject to two separate Canadian reviews, from the Competition Bureau and from Industry Minister Christian Paradis, who must decide whether to permit the deal or block it, either on national security grounds or because it is not of "net benefit" to Canada.
Peter Morici, professor at the Robert H. Smith School of Business - University of Maryland and a hawk on China's trade policies, said that Canadians have always been worried about American influence and American hegemony, but that "they'll worry a lot more about China being dominant than they ever did the Americans".
Shares in CNOOC fell the most in two months in Hong Kong trading on concern China's largest offshore oil and natural-gas explorer is overpaying in the $15.1 billion acquisition.
CNOOC shares dropped 4 percent to HK$14.82 ($1.91), the most since May 7, while the benchmark Hang Seng Index slipped 0.8 percent.
The transaction, including $2.8 billion of net debt, is 20 percent more than the $14.9 billion value of Nexen's assets, based on the Calgary-based company's proven and probable reserves, said Laban Yu, an analyst at Jefferies Hong Kong Ltd.
He said that CNOOC is paying a premium to boost China's energy security and avoid repeating its failed $19 billion bid for California-based Unocal Corp in 2005.
Meanwhile, the Nexen takeover is already drawing notice in US Congress, where Republicans have been pushing US President Barack Obama's Democratic administration to approve the Keystone XL oil pipeline from Canada.
Representative Lee Terry of Nebraska, of the House Energy and Commerce Committee, has presented a bill said to allow construction of the pipeline without a required "presidential permit".
Keystone XL was proposed as a 1,700-mile (2,735-kilometer) pipeline stretching from Alberta's tar sands to the US Gulf of Mexico coast.
Pipeline sponsor TransCanada Corp can't proceed unless the project gets a green light from the Obama administration to build across the US-Canada border.
The US State Department has said it will decide by early 2013 whether to approve TransCanada's plans for the northern portion of the pipeline.
Keystone supporters have argued that Canada will look for alternatives - including possible deals with Chinese energy companies - to shipping its oil from the tar sands if the US doesn't give permission for the pipeline to proceed south toward the Gulf.
Opponents, who say the pipeline's environmental risks outweigh the relatively small number of jobs it will create, argue that any Canadian oil flowing south will only be exported overseas.
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