China’s $15-billion deal to buy a major Canadian petroleum producer and a slice of the Alberta oilsands may have trapped the Harper government between a rock and a slippery slope of Chinese takeovers.

The bid by the state-controlled giant China National Offshore Oil Corp. (CNOOC) to buy Calgary-based Nexen Inc. and its stake in the oilsands was formally submitted to the Canadian government for approval late Wednesday.

The deal would be the largest-ever overseas takeover by a Chinese company, and the Harper government now has 75 days to make what may become one of its toughest policy decisions.

Government and industry sources familiar with the deal say if the simple sale of Nexen to CNOOC were the only consideration, federal approvals would be almost a formality.

But inside the Conservative government, sources say there are growing concerns that approving such a relatively huge takeover could open the door to a shopping spree for other Canadian energy companies by a cash-rich, resource-thirsty and thoroughly undemocratic China.

In short, the sale of Nexen is not game-changing in the overall scheme of the Canadian oil industry and national economy. But what if the Nexen deal became the regulatory template for China’s purchase of other oil companies at the core of Canada’s economic engine?

How could the Canadian government say "yes" to the sale of Nexen and "no" to others?

Nexen deal would include Syncrude stake

For example: CNOOC's purchase of Nexen would give the Chinese firm a seven per cent stake in the huge Syncrude consortium, one of the two largest producers in the oilsands.

Nexen CEO Kevin Reinhart addresses the company's annual meeting in Calgary last April. The oil and gas producer has agreed to be acquired by China National Offshore Oil Company for $15.1 billion US. (Jeff McIntosh/Canadian Press)

Another nine per cent of Syncrude is already held by CNOOC's state-owned sister company, Sinopec.

Industry analysts say if the Chinese go hunting for more companies after Nexen, one of the most likely takeover targets is Canadian Oil Sands, a partnership that holds about 37 per cent of Syncrude.

That deal plus China’s existing holdings would effectively give the Chinese government majority control of Syncrude, a consortium nurtured with billions of Canadian tax dollars and which currently produces the equivalent of 15 per cent of this country's total oil consumption.

The Chinese aren't just after Nexen's substantial oil reserves in Alberta, the Gulf of Mexico, the North Sea and Africa.

As it happens, China is sitting atop its own vast oilsands, and wants to acquire Canadian technologies and expertise to help get those reserves out of the ground.

China is also perched on a massive pile of capital looking for an investment, and right now, a number of Canadian oil companies — including Nexen — have sagging bottom lines that make them ripe for takeovers.

All of which is good for China and its state-controlled enterprises, but what about Canada?

That is precisely the question placed before the Harper government this week.

'Net benefit' to Canada

Over the next 10 weeks, Industry Minister Christian Paradis has the regulatory duty to approve or block the sale of Nexen to CNOOC, a decision that is supposed to be based solely on whether the deal would result in a "net benefit" to Canada.

CBC News asked the minister's office whether the government was concerned the Nexen deal could pave the way for future takeovers of Canadian energy assets to the point China could gain control of the Alberta oilsands.

Industry Minister Christian Paradis confirmed Wednesday that Ottawa has begun a review of CNOOC's bid for Nexen. The government has 75 days to issue a decision. (Sean Kilpatrick/The Canadian Press)

In a written response, the office of Paradis stated only that the minister would "take the time to properly scrutinize this proposed transaction and to assess that, if it is to go ahead, that it is likely to be of net benefit to Canada."

On that score, CNOOC is making it difficult for the government to say no.

Before the CNOOC offer, Nexen's profits were in the tank, its development plans were lagging and its CEO had left the building.

Now, CNOOC is promising jobs and investments galore, a new North American headquarters in Calgary, a listing on the Toronto Stock Exchange, and a sale price for Nexen that would leave lucky executives and shareholders laughing all the way to the bank.

The Nexen deal certainly isn't a turning point for keeping the oilsands in Canadian hands.

The Canadian Association of Petroleum Producers estimates that based on share ownership, two-thirds of the oilsands are already controlled by foreigners.

CNOOC itself is already a 35 per cent partner in Nexen’s main oilsands operation, and the Chinese have been investing in Canadian petroleum companies and properties for more than 25 years.

The feds have never blocked any of those deals.

Hard deal to turn down

Sources say the Harper government is under pressure from industry to use approval of the Nexen deal to wring some concessions out of Beijing on a range of issues affecting Canadian companies trying to do business in China.

But the prime minister would be hard-pressed to use Nexen to put China’s feet to the fire on anything.

After all, only six months ago, Harper was in China all but begging for Chinese investment in Canadian resource industries, particularly in the oilsands that require massive amounts of capital to develop.

Now that the money is rolling in by the billions for the Nexen takeover, how effectively can the Harper government realistically use approval of that deal to push for concessions on other trade irritants between the two countries?

The Harper government also sees the Nexen deal as a chance to repair the international damage done when it invented the term "strategic national asset" to justify blocking the politically unpopular sale of Saskatchewan's giant Potash Corp. to Australian conglomerate BHP Billiton in 2010.

This time, Stephen Harper wants to reassure international investors that Canada really is open for business, and not just making up foreign takeover rules as it goes along to suit domestic political ends.

Some American lawmakers are up in arms over the prospect of the Chinese government acquiring dozens of U.S. oil leases held by Nexen in the Gulf of Mexico.

But the chances of the U.S. administration trying to formally block the deal are slim.

In this country, recent polls suggest a majority of Canadians are inherently uncomfortable with a major domestic oil company being sold to the Chinese government.

But so far, those sentiments have failed to materialize in any meaningful way.

Unlike the Potash deal, there has been no public outcry over the Nexen sale, the Alberta government is solidly behind the move, the company being taken over is jumping for joy and shareholders are rubbing their hands in anticipation.

In both business and politics, those are called winning conditions.