Cnooc to agree on Canada's demands for Nexen takeover

Updated: 2012-11-21 07:16

By Bloomberg (HK Edition)

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Cnooc to agree on Canada's demands for Nexen takeover

Cnooc Ltd, China's biggest offshore oil and gas producer, has accepted management and employment conditions set by the Canadian government as it seeks approval for its $15.1 billion takeover of Nexen Inc, according to two people familiar with the matter.

Negotiators for the Canadian government adopted many of the conditions requested by Alberta Premier Alison Redford last month, which include guarantees that at least 50 percent of Nexen's board and management positions be held by Canadians, the two people said on condition they not be identified because negotiations are confidential.

Nexen stock jumped almost 7 percent last week, the biggest weekly gain since state-owned Cnooc bid for the Calgary-based oil company in July, suggesting investors are growing more optimistic the deal will be approved by the Canadian government.

Recent statements from Harper and federal cabinet ministers provide "favorable indications" that Cnooc's takeover of Nexen will soon be approved, as well as the separate bid the government is reviewing by Malaysia's state-owned energy company for Calgary-based Progress Energy Resources Corp, said Kyle Preston, an oil and gas analyst at National Bank Financial Group in Calgary.

"I think we're close," Preston said in a phone interview on Monday. "The government is looking at both the Cnooc-Nexen and the Progress-Petronas deals, which I think gives the appearance they'd like to make a decision on both at the same time and outline what the new framework is going to be for this net benefit test."

The Canadian government is reviewing the sale of Nexen under the country's foreign-takeover law, which specifies transactions need to have a "net benefit" to the country in order to win approval. Canada extended its review of the deal for a second time on Nov 2, setting the deadline to Dec 10.

While Prime Minister Stephen Harper has called it a national priority to sell more of his country's energy resources to Asia, he has said the Nexen sale raises "difficult policy questions" and the government will release a new policy framework on foreign investment when it completes the review of the Nexen takeover.

Peter Hunt, a spokesman for Cnooc in Canada, declined to comment on the company's negotiations with the federal government, when reached by phone in Calgary.

"The proposed transaction is undergoing a rigorous review under the Investment Canada Act and the required time will be taken to determine whether it is likely to be of net benefit to Canada," said Margaux Stastny, a spokeswoman for Paradis, in an e-mail.

"State-owned enterprises represent a different type of player, and obviously those are some of the issues that are before us," Harper said during a conference organized by the Canadian American Business Council in Ottawa on Monday.

(HK Edition 11/21/2012 page2)