The federal government has put a regulatory fence around Canada's oilsands, fearing it could see control of the key assets bought up by foreign state-owned companies.
Ottawa gave the green light to the blockbuster takeover of Calgary-based Nexen by a state-run Chinese company but in tough language, Prime Minister Stephen Harper made clear that future such deals weren't likely to get approved.
Harper made plain his worry that Canada could see control of the oilsands - where production is dominated by 15 private companies - lost to a foreign state-owned company in just a few deals.
"A series of large-scale controlling transactions by foreign state-owned companies could rapidly transform this industry from one that is essentially a free market industry to one that is effectively under the control of a foreign government," he said.
While the $15 billion takeover bid by CNOOC Ltd. doesn't raise such concerns, Harper said "further foreign state control would not be of net benefit to Canada."
Future takeovers of Canadian firms in the oilsands by foreign state-owned enterprises will be approved only an "exceptional basis."
Harper himself highlighted his government's worries, saying the goals of state-owned enterprises "may go well beyond the commercial objectives of privately owned companies."
The new rules would apply to foreign state-owned enterprises seeking a controlling stake in a Canadian oilsands company.
The government also updated its definition of a state-owned enterprise to include not just companies owned by a foreign government but also those influenced directly or indirectly by a government.
Over the next four years, the government will increase the threshold for reviews of takeovers by private companies under the Investment Canada Act to $1 billion. However, the threshold for review by state-owned companies will remain at $330 million.
The government has been increasingly concerned about the trend of business buyouts by foreign state-owned companies, which by 2011 had increased to 20 per cent of all takeovers reviewed by Industry Canada. That's up from nearly zero in 2008.
In a statement, Industry Canada said such state-owned companies are "inherently susceptible" to foreign government influences.
"I think the government is being as clear as we can be that except for those exceptional circumstances, we should not expect to see future transactions involving controlled interests in the oilsands approved," Harper said.
He revealed the government's "concern and discomfort" over the trend by foreign state-run enterprises in buying out corporate assets in Canada.
Asked why the oilsands and not other key sectors of the economy, Harper replied, "This is the question before us immediately. We will watch carefully other sectors of the economy to ensure this situation does not develop."
Harper said he was confident the oilsands would be able to attract the investment it needs to expand even under the new guidelines. But he added it has to grow in a "way that preserves the essential market-based nature" of the business.
NDP MP Peter Julian said the government was sending a mixed signal by approving this deal but vowing tougher action next time around. "They haven't fixed the process at all," Julian said, faulting the government for not mandating public consultations.
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