EU gives OK to CNOOC-Nexen deal, but big hurdle in Ottawa remains

BRUSSELS – The European Commission has given its OK to China National Offshore Oil Co.’s $15.1-billion bid for Calgary’s Nexen Inc.

Both companies are active in oil and gas plays around the world.

Nexen (TSX:NXY), for example, has operations in the North Sea so the proposed deal required approval under the European Union’s merger regulation.

The major hurdle for the deal is a review under the Investment Canada Act, which will determine if it is of net benefit to Canada.

The review deadline is this coming Monday, but that could be extended.

Ottawa has also promised new guidelines on foreign investment amid criticism that the net benefit test lacks clarity and consistency.

Canada’s spy agency raised a red flag on foreign investment by state-owned firms in its annual report earlier this year.

Though CSIS didn’t name specific countries or companies, it said certain state-owned enterprises have pursued what it called opaque agendas or received clandestine intelligence support for their pursuits in Canada.

Prime Minister Stephen Harper has said the Nexen-CNOOC deal “raises a range of difficult policy questions.”

CNOOC and Nexen have a pre-existing relationship. Last year, CNOOC scooped up Opti Canada, Nexen’s beleaguered minority partner in its troubled Long Lake oilsands project. The two firms also worked together in the Gulf of Mexico.

While Nexen’s headquarters are in Calgary, its strategic importance to Canada is questionable.

Only about 30 per cent of its forecasted daily production in 2012 is from its Canadian operations, with the vast majority coming from offshore platforms in the North Sea and elsewhere around the globe.