* Prentice says investment by state firms won't subside
* Says Canada shouldn't worry about "ethnicity of money"
* Current CNOOC-Nexen decision deadline is Dec. 10
By Jeffrey Jones
CALGARY, Alberta, Nov 14 Canada should not
reject Chinese investments in its oil industry out of hand
because China offers an important outlet as Canada seeks to
broaden the market for its crude oil supplies, a former
government minister said on Wednesday.
Jim Prentice, vice chairman for Canadian Imperial Bank of
Commerce and a former member of Prime Minister Stephen
Harper's cabinet, made his remarks as Ottawa reviewed the $15.1
billion takeover bid by China's state-owned CNOOC Ltd
for Nexen Inc.
Prentice said Canada must remain open for business and
realize that much foreign investment will be made by sovereign
wealth funds and state-owned enterprises from both democratic
and non-democratic countries.
The Harper government has intensified efforts to open up new
markets for Canadian oil in China and throughout Asia to reduce
reliance on the United States as its sole export market, in
hopes of boosting returns for fast-growing oil sands production.
"In such an environment, saying 'no thanks' to the largest
new market opportunity, namely China, would be patently unwise
-- particularly in circumstances where the transactions do not
imperil Canadian values or environmental and labor laws,"
Prentice said in notes for a speech to a major energy conference
"One can fairly expect Prime Minister Harper to move with
care and dexterity, balancing Canada's internal political
concerns about foreign investment with the imperative to develop
out its 'strategic partnership' with China and demonstrate
progress on the need for reciprocity," he said.
Early this month, Ottawa extended its deadline for ruling
on the takeover of Calgary-based Nexen by CNOOC to Dec. 10. The
government is scrutinizing the contentious deal under guidelines
for state-owned enterprises that Prentice drafted as minister of
industry five years ago.
Canada blocked Malaysian state oil firm Petronas's C$5.2
billion ($5.2 billion) bid for Progress Energy Resources
, a natural gas producer, on Oct. 20, but rather than
completely ruling the deal out, it offered Petronas 30 days to
make new representations to the government.
The government has pledged to release a clear set of
guidelines for such transactions when it announces its decision
on the takeover of Nexen.
Meanwhile, some Canadians, including a few members of
Harper's government, have expressed concern over increasing
control of the country's energy resources by China.
Prentice pointed out that most of the world's top 10 largest
energy companies are state-owned and that most have investments
in Canada, whose oil sands are the world's third-largest crude
He acknowledged such companies are different from other
market players, as they "harness the power of both capitalism
and the state," and therefore raise public policy questions.
As a result, Canada needs to make its criteria for allowing
investments by state-owned enterprises clearer and insure that
"undertakings" that investors agree to are enforced, he said.
Ottawa should not, however, concern itself with the
"ethnicity of money" or try to force China and other countries
to be more like Canada, Prentice said.
"The question must instead be whether the capital in
question, once lodged in Canada, will adhere to market
principles and to North American standards of governance and
transparency," he said. "If so, then it should be welcomed. If
not, then the investments should be scrutinized closely and