China National Offshore Oil Corp (CNOOC), China’s largest producer of offshore crude oil and natural gas, has placed a bid of $15.1 billion to take over Nexen, a Canadian oil and gas company active in some of the world’s most significant basins — including Western Canada, the U.K. North Sea, offshore West Africa and the Gulf of Mexico.
The proposed buyout is controversial because the interested buyer happens to be wholly owned by its government — a government, it can be argued, whose values and beliefs differ greatly from those of our country, Canada.
It wasn’t long ago, just 2005, when China Minmetals made a bid for Noranda, then Canada’s largest mining enterprise. The proposal was abandoned when it became aware that Minmetals was a branch of the mines department of the Beijing government.
There are obvious areas of concern in the Nexen deal:
• National security and the pursuit of certain state-owned enterprise agendas.
• The nationalization of a strategic Canadian company.
• The sale of domestic ownership of our non-renewable natural resources.
• CNOOC’s corporate governance standards — the likely refusal to abide by Canada’s standards and Toronto Stock Exchange (TSE) regulations.
• Equivalent access to China’s market.
• Undisputed access to Canada’s technological innovations — innovations that have been paid for by Canadian taxpayers.
The Harper government has stated repeatedly that there is a process in place to review and scrutinize this transaction closely in order to determine if it is of net benefit to Canada. What exactly is this process, however, and what constitutes a “net benefit”? The Investment Canada Act, which obliges the government to review significant investments in Canada by non-Canadians, mentions few factors that are to be taken into account, such as the effect of the investment on the level and nature of economic activity in Canada, and the effect of the investment on competition within any industry or industries in Canada. However, the “net benefit” test remains undefined and the review process opaque.
On two separate occasions, I have proposed that the government leader in the Senate submit a request to the prime minister for a clear mandate enabling the Banking, Trade and Commerce Standing Committee to conduct a thorough study that would clarify the current opaque “net benefit” criteria of the Investment Canada Act. A similar process took place when the Bank Act was under review and, consequently, the committee’s recommendations were considered and implemented. Evidently, this proved to be a success as Canada’s banking system became a leading model during the global economic crisis.
A thorough study would allow committee members to hear from experts, stakeholders, international organizations such as the Organization for Economic Co-operation and Development, provincial governments and the Obama administration, among others. Such a diverse panel could provide significant input based on their knowledge and experience. In turn, the committee could make recommendations to the government proposing an amendment to the current legislation for a more transparent and rational process, one that is not based on the Conservative agenda but, rather, based on serving the best interests of all Canadians. Unfortunately, I have yet to receive a clear response, but hope that the Conservative government, a government that prides itself on a strong economic track record, will seriously consider my non-partisan request.