Industry Minister Christian Paradis has blocked the foreign takeover of a Canadian natural gas producer, astonishing the oil and gas industry. The $16-billion purchase of Calgary-based Progress Energy Resources by the Malaysian national oil company, Petronas, had provoked no public outcry; nor had it encountered resistance from the Industry Department in discussions with the companies. Following the official thumbs-down late Friday, Progress and Petronas set to work this week to find out what they have to do to win approval of the deal.
Prime Minister Stephen Harper told his Monday news conference in Ottawa the government still intended "to put out a clear and new policy framework regarding these sorts of transactions" in the near future. Neither he nor Mr. Paradis said what was wrong with the Petronas purchase of Progress beyond the puzzling conclusion that it was not of net benefit to Canada.
After weeks of discussions with the department, Progress Energy chief executive Michael Culbert was not aware that the government had any objections to the takeover.
On its face, the deal is of great benefit to Canada. The two companies are partners in a plan to build a natural gas liquefication plant at Prince Rupert, B.C., for export of gas from Progress' shale gas properties in Alberta and B.C. Western Canada is glutted with natural gas while Malaysia is running short and is eager to buy Canada's surplus.
The elephant in the room is the Chinese takeover of Nexen. The government has not yet said yes or no to the controversial plan of the Chinese National Offshore Oil Company -- CNOOC -- to acquire all the shares of Calgary-based Nexen Energy Resources. That deal would make an agency of China's government and of its ruling Communist party a player in the Alberta oilsands. If Mr. Harper says yes to the national oil company of Malaysia today, it might seem rude to turn around and say no to the national oil company of China a few weeks later. The government at the 11th hour sought delay of the decision on Progress and Petronas but the companies could not comply.
The government's solution for the moment is to be rude to everyone. The Petronas takeover has been put on hold though the government has shown no fault in the deal and no one is complaining about it. Investors around the world are left scratching their heads about investing in Canadian oil and gas firms. Mr. Harper has reiterated that the government welcomes foreign investment as long as it provides a net benefit to Canada, but that is hard to prove at the moment.