Industry minister sees worrisome 'trend' in oilsands

The federal government welcomes foreign investment by state-owned enterprises, but only up to a point, and that is the message Canada's industry minister is emphasizing after giving the green light to two foreign investment takeovers.
Industry Minister Christian Paradis spoke with CBC Radio's The House after Prime Minister Stephen Harper gave two major takeover deals the green light on Friday. (Sean Kilpatrick/The Canadian Press)

The federal government has reached "a level of discomfort" with foreign investment by state-owned enterprises in Canada's energy sector. 

That's the message Canada's Industry Minister is emphasizing after giving the green light to two major takeover deals: a $15.1-billion bid for Nexen Inc. by a Chinese state oil company and a $5.2-billion bid by Malaysia's Petronas for Progress Energy.

In an interview Saturday on CBC Radio's The House, Christian Paradis told host Evan Solomon that the China National Offshore Oil Company (CNOOC) was able to show that its bid for Calgary's Nexen was likely of "net benefit" to Canada after the Chinese state-owned enterprise (SOE) made "significant undertakings" in areas of governance, transparency and disclosure.

However, Paradis said it was "important" for the federal government to send a "strong signal" that it would not accept foreign investment at any cost.

The industry minister said the Canadian government would not put the interests of foreign governments ahead of its own.

Paradis, noting a "growing trend," said SOEs have "triggered a level of discomfort," so the Canadian government will consider the acquisition of a Canadian oil-sands company by an SOE only in "exceptional circumstances."

The prime minister used similar language when he said, "in light of growing trends," the government had concluded that "foreign state control of oil sands development has reached the point at which further such foreign state control would not be of net benefit to Canada," during his announcement on Friday.

CBC News has learned that the unease in those "trends" comes from the fact that SOEs now have a 20-per-cent stake in Canada's natural resources. That's where the federal government appears to be drawing the line.

Paradis told Solomon the Canadian government "saw a trend" and "now I think we have reached a threshhold where we have to say we can not go further."

'Exceptional circumstances'

While the minister could not define them, these "exceptional circumstances" would only apply to takeover by SOEs in the oil sands. Different critera will apply to takeovers outside of the oilsands or takeovers by private firms.

When asked why the federal government would make this distinction around the oilsands but not other sectors of the Canadian economy, Paradis said "this is a good question here."

According to the industry minister, 60 per cent of Canada's proven oil reserves are not owned by SOEs.

"So we have to protect this," Paradis told Solomon adding "and of course after that we know that there is 15 major players there. So there is a level of concentration, plus the trend that we see. This is why we carve out the oil sands here talking about the exceptional basis."

The Opposition New Democrats have denounced the federal government's decision in both takeover deals.

In a separate interview Saturday on CBC Radio's The House, NDP Energy and Natural Resources critic Peter Julian called the decision "irresponsible."

"The government is trying to sugar coat what is a very bitter pill for Canadians to swallow," Julian told Solomon, adding that the government's foreign investment policy is no clearer today than it was before.

Liberal Natural Resources critic and leadership contender Marc Garneau also questioned the message in the government's decision and told Solomon he was calling on the Conservatives to define what "exceptional circumstances" means.

When asked what Canada got in return from China, Paradis said, "We sent a signal that we expect our companies will be treated equally. There is the rule of law here, there is an equitable basis among the companies investing here in Canada, and you know we say that we expect the same from China."

The federal government recently signed an investment treaty with China and while it was suppose to come into law since early November, International Trade Minister Ed Fast told Solomon that as of Friday, it had yet to be ratified by either side.