CNOOC chairman confident $15.1b takeover will be sealed by year-end

The chairman of CNOOC Ltd, China's biggest offshore oil and gas producer, is confident its $15.1 billion takeover of Canadian company Nexen Inc will be completed by the end of the year.

CNOOC announced its plan to buy Nexen in July, but the Canadian government has extended a review of the bid twice, triggering doubts over the ultimate success of the deal.

But Chairman Wang Yilin, speaking on the sidelines of the 18th National Congress of the Communist Party of China, said on Friday: "It is normal for the Canadian government to extend the review because the deal is the largest overseas takeover in history.

"I am very confident that the deal will be approved next month because CNOOC's businesses and its management meet all the regulations," he said.

A takeover of Nexen would add 200,000 barrels a day, or more than 70 million barrels a year, to CNOOC's output.

The Beijing-based company last month raised its 2012 net production target to 245 million barrels, an increase of 1.5 percent year-on-year.

According to Canadian law, any takeover of a Canadian company worth more than $331million requires regulatory approval.

Canada had extended its review of the deal twice, in October and November, in order to evaluate whether the deal will bring "net benefits" to the country. It is due to make the final decision on Dec 10.

Canada's ambassador to China, Guy Saint-Jacques, said on Monday at a Canada-China energy conference in Beijing that Canada will not extend its review of the deal for a third time.

He said the Canadian government was taking its time to review the acquisition because of its "unprecedented" size.

Despite some in Canada suggesting the country's oil and gas resources should not be developed by overseas State-owned companies, industrial experts say the deal will prove good for the country.

Jeremy South, global mining leader at business adviser Deloitte, told China Daily that the relationship between the two governments would be a crucial factor.

"The Canadian government has to form a policy which can be applied to all similar large cross-border acquisitions in the future, which is the main reason for the approval delay in this case," he added.

Liao Na, information director at energy consultancy ICIS C1 Energy, said he thought the Nexen deal would be the first of other major acquisitions overseas by Chinese oil companies.

Earlier this week, China's Ministry of Finance announced that it plans to allocate funds from its central budget to subsidize shale gas exploration as part of its efforts to optimize the country's energy structure.

Shale gas, an unconventional source of natural gas, has gathered steam in China amid the government's efforts to promote the use of clean energy.

Asked about shale gas in China, Wang Yilin said the government should ensure its development is carried out slowly, with more effort made on scientific and technological research into any shale gas exploration.

"Although China has rich shale gas resources, it should be explored within a reasonable scale," he said.

According to Karl Baker, M&A mining leader, Deloitte China, if CNOOC's takeover of Nexen gains approval, Canadian companies will be hoping to have more access to China's energy market in return, particularly its shale gas sector, which would be mutually beneficial.

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(China Daily 11/10/2012 page9)