COLUMN: Lilley – Why CNOOC should be sent packing

- August 3rd, 2012

Hit reject button

Harper government must say no to CNOOC bid for Nexen

by Brian Lilley

It’s a given that China is a country Canada must deal with, but the idea that Canada must sell out to China is not.

Currently, China’s state-owned oil company CNOOC is attempting to make a big play in Alberta’s oilsands with its proposed takeover of Nexen. The deal needs the approval of the federal government and despite Stephen Harper’s recent warming to China and his commitment to expanded trade, he must say no to this deal.

Harper is a believer in free trade among nations, but with China we don’t have free trade or anything close to it. Supporters of the deal claim it would be hypocritical of Canada to push for free and open trade and then turn down CNOOC’s offer to buy a Canadian oil company. Not so.CNOOC, which stands for China National Offshore Oil Corporation, wants to buy all of Nexen which has oil rights in Alberta, the Gulf of Mexico and the North Sea. There is no chance a Canadian company could attempt a similar takeover of CNOOC.

One of the other major problems with allowing the takeover is that CNOOC is not a private company operating on a level-playing field.

This is a company wholly owned by the government of China and, as such, has tremendous advantages that private companies do not have. CNOOC can borrow money at the same rate as the Chinese government which is well below commercial rates.

They also have no need to make a profit and any losses are covered by the government.

Nexen shares were trading at $17 when CNOOC offered $27.50 per share on July 23. Would a private company have been able to make such a generous offer? Perhaps, but the point is China wants this asset and has sent CNOOC to get it regardless the price.

The offer includes all kinds of promises about jobs in Canada, a North American headquarters in Calgary and investment. It’s all poppycock dreamed up by CNOOC’s highly paid lobbyists in Ottawa to make the deal palatable to the Harper government.

Reacting to the announcement of the deal, Canadian business executive James Doak warned against the feds agreeing to CNOOC’s purchase. Doak was part of the committee that oversaw the sale of PetroKazakhstan to CNOOC.

“They are very, very polite and very, very agreeable before the final deal is inked,” Doak said. “After the final deal is inked, they run it completely themselves. They get rid of everybody.”

Doak said that’s what happened at PetroKazakhstan — once CNOOC had acquired all the knowledge they needed, they fired everyone.

The third major reason the deal should be turned down is a moral argument, one that many business people reject but most Canadians should not. The Chinese government is the sole owner of CNOOC and when you allow CNOOC to buy up your assets, you are giving your blessing to a government that jails political dissidents, executes citizens who oppose it and refuses to recognize human rights. That doesn’t even touch on CNOOC’s or the Chinese government’s environmental record.

The wooing of lobbyists in coming months will be strong, the calls from Bay St. to approve this deal will be loud, but Stephen Harper must say no.

Categories: Contributor Columns

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