Indeed, the Canadian prime minister will be applauding.
If Athabasca is rivalled only by the Middle East in its vast oil reserves, the world’s top creditor nation has its own vast resources — of cash — that Harper is eager to tap. Chinese firms already have pumped $17 billion into North American oil and gas plays since 2010. But there’s at least another $2 trillion of acquisition firepower where that came from.
The Cnooc embrace also puts muscle into Harper’s warnings to Washington that Canada is ready to redirect its oil exports to Asia if the U.S. balks at, say, the proposed Keystone XL pipeline that Calgary’s TransCanada Corp. proposes to build across the length of the U.S.
U.S. President Barack Obama has crossed swords with Ottawa with his one-year moratorium on the Keystone XL megaproject. That delay prompted Harper to turn up the volume on his kind words for China.
Canada has long enjoyed friendlier relations with Beijing than has the U.S., a tradition dating from Norman Bethune and Pierre Trudeau’s rebuke to Washington in supporting China at the U.N.
But the current Ottawa-Beijing coziness is a remarkable twist for Harper, who came to 24 Sussex as a relentless critic of China’s record on human-rights abuses. Eventually, the economic interests of Harper’s home province dulled his principles on that topic.
Yes, Harper did block London-based BHP PLC’s hostile takeover bid for Saskatchewan-based Potash Corp. But Potash is an enterprise of global strategic importance, given its world dominance in potash, and the key role potash plays in world food supplies.
Nexen, by contrast, is a second-string player. A spinoff from U.S.-based Occidental Petroleum Corp., Nexen had no coherent strategy as a stand-alone firm.
For years it was known mostly for its Yemeni assets. The “country risk” of that neighbourhood — currently among al-Qaeda’s leading refuges — was long a drag on Nexen shares.
The remedy, Nexen felt, was to diversify into the Gulf of Mexico and the North Sea, and to gain prominence in the Alberta tarsands.
Alas, what emerged was a hodgepodge of assets that failed to win favour with investors. They’ve pushed the value of Nexen shares down 58 per cent from their 2008 peak.
Nexen shook up its top management in January, installing a new CEO. Small wonder. Operational glitches have kept Nexen’s Long Lake tarsands project in Alberta from achieving anything close to its promised 72,000 barrels per day of bitumen production.
Nexen’s revenues have stagnated, slipping 14 per cent over the past four years of strong world oil prices. And profit dropped 37 per cent last year, to $697 million, far off Nexen’s 2008 peak profit of $1.7 billion.
The players of national strategic importance in Athabasca are Suncor Energy Inc. and Syncrude Canada, followed by Canadian Natural Resources Ltd. With market valuations of $48 billion and $32 billion, respectively, Suncor and Canadian Natural Resources are likely safe from takeover. (Nexen’s market cap was a modest $9.2 billion.)
Cnooc has gone a country kilometre in meeting the “net benefit to Canada” requirement in foreign investment rules. Its announcement Monday includes a promise to make Calgary the head office for its North and Central America assets.
Those are considerable, and likely to grow, as Beijing targets such U.S. firms as Chesapeake Energy Corp., Anadarko Petroleum Corp., Devon Energy Corp. and Marathon Oil Corp. Last year, Cnooc bought from bankruptcy Opti Canada, Nexen’s original partner in the troubled Long Lake project. And it has acquired stakes in MEG Energy Inc. and Northern Cross (Yukon) Ltd.
Cnooc will also list its shares on the Toronto Stock Exchange. That’s a prize catch for the world-class resources exchange, which will boast a rare foreign listing of one of China’s Big Three oil and gas giants.
The Nexen deal begins an overdue replay of recycling of Middle East petrodollars back into Western economies after the 1970s oil shocks. As Ned Beatty’s character in the 1976 film Networkwould say, they’ve taken money out of our economy (think of all those Walmart shoppers) and now the Chinese must put it back.
The Nexen deal, heralded in most quarters Monday as a monster-sized deal, doesn’t fit that description in transaction value. But it does so politically. Amid a change of leadership in Beijing, the new Chinese president and PM soon to take power have just signalled a continuation — indeed, a ramping up — of China’s desire to extend its global industrial ambit.
That’s the big news today. That and Harper’s triumph in wooing Beijing, which has chosen Canada for its biggest initial foray in laying claim to North American-controlled energy assets worldwide.
Original Article
Source: the star
Author: David Olive
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