Canada needs foreign capital, policy talks ongoing: Finance Minister

NEW YORK (Reuters) - Canada needs foreign capital to develop its oil sands and is in the "middle" of discussions on how to approach foreign takeover bids such as the $15.1 billion offer by China's CNOOC 0883.HK for oil and gas producer Nexen NXY.TO, Finance Minister Jim Flaherty said on Friday.

Ottawa is deciding whether to allow or block two major transactions by state-owned players: the bid by China's top offshore oil and gas producer for Nexen, and a $5.2 billion bid by Malaysia's Petronas PETR.UL for Progress Energy Resources Corp PRQ.TO.

The issue is hugely controversial in Canada, especially when natural resources are at stake. Prime Minister Stephen Harper has said he would unveil a new policy framework for dealing with foreign takeover bids around the same time as the government announces a decision on the two deals.

Asked for his views on what the new guidelines should contain, Flaherty suggested they were not yet ready.

“We are in the middle of having this discussion within government ... We’re looking at it broadly, and we’re looking at the various issues which we think need to be addressed related to foreign direct investment in Canada,” he told reporters after giving a speech in New York.

“It’s clear that the amount of investment required to develop the oil sands and other resources in Canada exceeds the amount of capital within Canada, so it’s inevitable that there will be substantial direct foreign investment in Canada,” he said.

“The question then is what form does that take, what form does it not take, and that’s what the government is looking at now with respect to guidelines.”

Flaherty echoed Harper’s guidance on the timetable for an announcement. “The prime minister has said the guidelines will be ready in the not-too-distant future, which I realize is relatively vague, but that’s where we are.”

Flaherty later told reporters in Canada by telephone that the reason he could not give a date for the release of the framework was that it was not finished. “This is a matter that’s under actual consideration and that’s where we are,” he said.

The announcement is expected by December 10, the deadline for Ottawa to complete its review of the CNOOC proposal.

Flaherty said he did not know whether the policy announcement would be simultaneous with the decisions on the two takeovers.

Writing by Louise Egan and Randall Palmer; Editing by Dan Grebler