The federal government needed the wisdom of Solomon to come up with a decision on the takeover of Nexen Inc. by CNOOC, a Chinese state-owned oil company. While Solomon’s wisdom was not available, the decision announced on Friday by Prime Minister Stephen Harper does cover a lot of bases and answer many concerns.
The Canadian economy operates through the free enterprise system. Direct government involvement in the economy, by way of ownership of companies, has been drastically reduced in the past 20 years.
At the same time, the oil sands are likely the greatest treasure trove of a scarce resource in the world, and they need vast amounts of capital to even begin to be developed. While many oil companies are involved in the oil sands, they have a finite limit on how much capital they can commit to their projects there — particularly when oil prices are unstable and demand is dropping in many markets.
CNOOC wants to be part of the oil sands. Nexen offers that opportunity, even though it is not a major player there. In fact, most of its assets are outside Canada, but it is based in and run out of Calgary.
Many Canadians of all political stripes have grave concerns about the Chinese government controlling and influencing a sector of the Canadian economy, and that’s a reasonable concern. That’s why Harper said that the Nexen purchase will be the last by a state-owned oil company, unless there are “exceptional circumstances.” What those are remains to be seen.
Canada needs foreign capital. However, the federal government has not been nearly as vigilant as it should be after allowing takeovers. It has often stood by as companies are hollowed out by foreign buyers. The best example of this is Stelco in Hamilton, but there are many others.
This time around, the government promises to be looking at Nexen’s operations on an ongoing basis and monitoring just how it operates under CNOOC control. This ongoing vigilance is necessary with large foreign takeovers, particularly in the resources field.
China is welcome to invest in Canada. Whether Chinese companies are state-owned or private, they need to fully adhere to all Canadian laws, employ Canadians and be good corporate citizens in this country. They also need to keep their promises. If they do so, there should be no problems.
