Should Canada allow foreign state owned companies to buy Canadian resource companies?

[JohnnyB]

Originally Posted by vanisleflamesfan

Well, Harper just signed the “Canada-China Foreign Investment Promotion and Protection Agreement”. It is set for automatic approval on October 31 with no discussion in Parliament, no debate, and no vote (although Rerun will like that).

The Agreement gives Chinese state owned companies the right to sue the Canadian government over any decisions that limit or reduce their "expectations of profits", and will be able to claim damages against Canada for decisions made at any level of Canadian government. The agreement allows Chinese companies to challenge Canadian laws if they might reduce the profits of Chinese companies. Additionally, these challenges won’t be settled in Canadian courts, but rather in secret arbitration hearings, so future governments may be forced to change our laws without us ever knowing why.

So basically, “Hi China, take anything you want”.

The Harper government seems to be bending over backwards to make some quick profits from the sale of our resource companies to China.

If that's the case it's bound to hurt Canadians. One of the big differences between Canada and China is that Canada can be expected to follow through on laws and legal processes even when they might not serve its purposes, which China cannot. Totally undermines any kind of agreement legally binding the Western party because the Chinese party doesn't follow the same rules and nobody is going to force them to do anything. Penalties apply to one side only.

[vektor]

my career path is heading into hard mineral exploration and all I can say is I'm gonna kick Harper in the dick if I have to work minimum wage for our Chinese overlords.

[tete]

Originally Posted by fotze

I think we should only allow foreign countries of honky origin take over Canadian ones. That seems to be when people started caring. American or British. A-ok. Chinese, whoa.

Don't forget the French!

[JohnnyB]

Originally Posted by fotze

I think we should only allow foreign countries of honky origin take over Canadian ones. That seems to be when people started caring. American or British. A-ok. Chinese, whoa.

Although there might be some xenophobia involved in people's response to Chinese takeovers, the truth is that China represents a much bigger threat than the States or Britain because China's demand for resources will be so much greater and the country operates so differently politically.

[TurnedTheCorner]

Is it naive of me to think that, regardless of whether an energy company is domestically owned or foreign owned in Canada, the resources are going to the same markets to be consumed by the same users? The gas is locked in for the foreseeable future. I don't know that the oil can be easily exported more than it already is. So I feel like I'm missing something.

[Azure]

Originally Posted by TurnedTheCorner

Is it naive of me to think that, regardless of whether an energy company is domestically owned or foreign owned in Canada, the resources are going to the same markets to be consumed by the same users? The gas is locked in for the foreseeable future. I don't know that the oil can be easily exported more than it already is. So I feel like I'm missing something.

I think there is a lot of over-reaction in this thread. The Chinese won't make their employees work for minimum wage. While they operate here in Canada they have to play by our rules, which WILL mean competitive wages if they want to keep their workers, because a geologist could just as easily go work for Suncor or Encana.

I still maintain that they're doing it not only to get their foot in the door on perhaps the most massive manufacturing project in the world over the next 20 years, but to also gain knowledge on how North American oil companies operate, and the technology that makes them tick. There is a reason that the US wanted American oil companies like Shell and Exxon to get into Iraq and help develop their oilfields.

[Slava]

Well I'm really of two minds here. First a large part of me thinks that the Chinese would not let us buy a company and do this in China (and there are other countries as well who operate like that), so why would we allow it here? The other side of me says that shareholders should be able to sell their shares to whomever they see fit. That's the market and the government should stay out.

The conservatives (small "c") have really been on this for years though. If you look back to the 80's and early 90's we had the Alberta Energy Corporation. This was setup by Lougheed and he did this for one simple reason; so that citizens here could share in the wealth of our resources. Yes, I know "we get royalties" from the foreign corporations, and thats great. Those foreign corporations though are here for one reason, and one reason only. They make money. So if everyone else comes here and turns a profit, you have to ask yourself....how dumb are we? The whole "not in the business of being in business" line we heard for years is just foolish ideology. The people of this generation and the next deserve better.

The AEC was sold by Klein (for a pittance!) when he was on his ideological bender to pay the debt ASAP. For those who don't know the AEC today is Encana and Cenovus; still two significant corporations in our provincial economy.

I can't say I'm entirely against foreign direct investment here, I just wish we were smart enough to get a piece of the action as opposed to letting every other state-owned company benefit will we provide the infrastructure. Its a terrible mistake.

[JohnnyB]

Originally Posted by Slava

Well I'm really of two minds here. First a large part of me thinks that the Chinese would not let us buy a company and do this in China (and there are other countries as well who operate like that), so why would we allow it here? The other side of me says that shareholders should be able to sell their shares to whomever they see fit. That's the market and the government should stay out.

The conservatives (small "c") have really been on this for years though. If you look back to the 80's and early 90's we had the Alberta Energy Corporation. This was setup by Lougheed and he did this for one simple reason; so that citizens here could share in the wealth of our resources. Yes, I know "we get royalties" from the foreign corporations, and thats great. Those foreign corporations though are here for one reason, and one reason only. They make money. So if everyone else comes here and turns a profit, you have to ask yourself....how dumb are we? The whole "not in the business of being in business" line we heard for years is just foolish ideology. The people of this generation and the next deserve better.

The AEC was sold by Klein (for a pittance!) when he was on his ideological bender to pay the debt ASAP. For those who don't know the AEC today is Encana and Cenovus; still two significant corporations in our provincial economy.

I can't say I'm entirely against foreign direct investment here, I just wish we were smart enough to get a piece of the action as opposed to letting every other state-owned company benefit will we provide the infrastructure. Its a terrible mistake.

Agreed. The Chinese government protects its interests staunchly and puts them first. If Canada's not doing the same then Canadians are going to lose out on deals with China. It's especially worrying when natural resources are Canada's most important factor for sustaining significance in a global market long-term.

Foreign direct investment is a good thing, but dealings around that type of investment need to be very shrewd.

[GP_Matt]

Slava, Encana was a merger between Pan Canadian and AEC. One of the reasons Encana has been so successful was because Pan Canadian was split off from Canadian Pacific and held mineral title to large tracts of coal bed methane properties. Owning the mineral rights meant that they didn't have to pay royalties on production. It is dishonest to credit Encana's success solely to the price they paid for AEC.

[Slava]

OK, I stand corrected on Encana/AEC. The fact remains though that Albertans getting a piece of the action is a good thing in my books though!

[Azure]

Days after the federal government rejected a multi-billion dollar bid by Malaysian company Petronas for Calgary-based Progress Energy Resources Corp., Finance Minister Jim Flaherty said the company still has time to revise and resubmit its proposal.

During an interview on CTV’s Question Period Sunday, Flaherty maintained that the Canadian government welcomes foreign direct investment, but any deals must ultimately benefit Canadians. Applications for foreign takeovers, such as the one filed by Petronas, must ultimately “be correct,” said Flaherty.

“(It) has to do with two tests really: the net-benefit test – is the proposal in the net benefit of our country and b) are there any national security concerns,” said Flaherty. “There’s a list of items in the Investment Act itself relating to the net-benefit test, I believe its six items in total that the minister of industry has to regard.”

http://www.ctvnews.ca/foreign-direct...#ixzz29xLF0N8w

Could someone explain this better? A foreign takeover is still a foreign takeover. How could they revise the proposal in order to get the government to approve the deal?

[GP_Matt]

Foreign takeovers are subject to a vague net benefit rule. The deal has to be a net benefit to Canada. So the government decided that it wasn't but Petronas has time to sweeten the deal and reapply. It is all pretty secretive, but it could be something like promising to keep their NA headquarters in Calgary or list the company on the TSX. Or even sell off a portion of the company to a Canadian entity.

[Slava]

The CPC is just intent on market interference. They have this "net benefit" test that they refuse to define, which makes it impossible to predict the outcomes of these deals. Who knows what they'll define as a net benefit and how they get to that conclusion? How can shareholders have any faith that they can sell their shares as they see fit, to the highest bidder?

There is a real erosion of confidence here. If you bought Progress shares before this deal, one of the things you might have hoped for is an offer like this one. Unfortunately though these same shareholders are hearing after the fact that they can't accept the offer. It makes for bad optics.

Oh, and in case anyone is curious about the six criteria that Flaherty references, here they are. Would it be so difficult for the government to specify where a bid causes issues in regard to this list?


the effect of the investment on economic activity in Canada;
the degree of participation by Canadians in the business in question;
the effect of the investment on productivity, efficiency, technological development, product innovation and product variety in Canada;
the effect of the investment on competition;
the compatibility of the investment with national industrial, economic and cultural policies;#and
the contribution to Canada’s ability to compete globally.

[JD]

Just a question out of curiosity... what is all this ultra-secret technology we're afraid of relinquishing?

Most of the technological advances are one or both of, 1) owned by large multi-national service companies, or 2) available for perusal by anyone via the SPE and other technology societies.

Any proprietary technology owned by the oil companies themselves are, as mentioned earlier, probably very area and application specific and not necessarily useful to the Chinese or Malaysians. Unless, of course, they're operating in Alberta.

[bizaro86]

Originally Posted by Azure

You don't agree that the technology Alberta oil companies use to extract oil/gas is much further advanced than anything Chinese owned companies operating in China have?

Also not sure how you think they could poach Nexen employees either without actually buying the company. That is why they put in a premium bid.

They could poach nexen's employees by making them job offers for more money than they make now. I have many friends and former classmates who are engineers at Nexen, they would all have gone to work for the Chinese at a new Calgary office for a big raise. If the Chinese just wanted the employees or technology, they easily could have poached the employees and hired the same service companies.

Originally Posted by Rerun

Ya... how many Nexen employees that employed in critical technology fields would want to move to China?

The Chinese won't be moving Nexen employees to china. You transfer ideas without transferring human beings, using phones and the Internet.

Nobody has answered my question about what technology Nexen has that we should be protecting, because there isn't anything. And with most of their production outside the country, it's hard to argue we have a nationalist right to their holdings in the North Sea or the Gulf of Mexico.

[GP_Matt]

Below is a quick list of oil companies in Alberta with ownership outside of Alberta

OMERS - owned by an Ontario pension plan
Taqa - Abu Dhabi
Husky - Hong Kong
Shell - Netherlands
Imperial - American
Devon - American
BP - British
StatOil - Norwegian
Murphy - US
ConocoPhillips - US
Total - French
Aadarko - US
Apache - US
Plains - US
Koch - US (The famous Koch brothers that they hate so much on the Newsroom)

There are a ton more, especially if you start looking at Canadian companies like CNRL that are majority owned by shareholders who live outside Canada.

[Azure]

Originally Posted by GP_Matt

Below is a quick list of oil companies in Alberta with ownership outside of Alberta

OMERS - owned by an Ontario pension plan
Taqa - Abu Dhabi
Husky - Hong Kong
Shell - Netherlands
Imperial - American
Devon - American
BP - British
StatOil - Norwegian
Murphy - US
ConocoPhillips - US
Total - French
Aadarko - US
Apache - US
Plains - US
Koch - US (The famous Koch brothers that they hate so much on the Newsroom)

There are a ton more, especially if you start looking at Canadian companies like CNRL that are majority owned by shareholders who live outside Canada.

How many of them are state owned?

[lucky1]

Originally Posted by bizaro86

They could poach nexen's employees by making them job offers for more money than they make now. I have many friends and former classmates who are engineers at Nexen, they would all have gone to work for the Chinese at a new Calgary office for a big raise. If the Chinese just wanted the employees or technology, they easily could have poached the employees and hired the same service companies.




The Chinese won't be moving Nexen employees to china. You transfer ideas without transferring human beings, using phones and the Internet.

Nobody has answered my question about what technology Nexen has that we should be protecting, because there isn't anything. And with most of their production outside the country, it's hard to argue we have a nationalist right to their holdings in the North Sea or the Gulf of Mexico.

oh come on - thats a crock - CNOOC is not going to move in here, give all NEXEN staff big raises and open a new building - The chinese will have no doubt analyzed the current market to death - they will keep Nexen middle of the road with respect to compensation - much like STAToil did with Leismer.
There are many NA and European based companies already operating withing china - but all of these are on a partnership type basis with one of the state owned Chinese Oil companies - so, this whole thing about buying Nexen to poach its superior technology is also BS - its already being utilized on several fronts - Besides, i worked for Nexen for many years, both in canada and overseas - I can guarantee you that there is no ultra secret proprietory processes being put into play - one of the most poorly run oil companies in canada - they had to close the balzac gas plant due to drilling nothing but dry holes - they had no gas to fill the plant - poor reservoir management in yemen means they are down about 75% of the production they had just 2 years ago, poor geological assessment of the long lake reservoir has made it impossible for that plant to get to even close to advertised rates - I say let CNOOC have it - Nexen does not and will not have the capital required to get that field up to full production.....

for the record - I am not advocating full ownership of canadian resource based companies to any state or non state owned foreign company - in a perfect world, we would do exactly what the chinese currently do - bring in partners on a 49/51 basis on certain projects. Canada, in my mind, has already set the stage by the takeover of North American Oil Sands by STATOil (which is 100% state controlled) - granted I trust the norwegians a lot more than the chinese, but it is still 100% owned by a state owned foreign oil company.....but NEXEN, I just shake my head, let CNOOC have it. The USA will force Nexen to sell its properties in the gulf, the UK may force Nexen to divest the buzzard properties in the north sea - and all thats left is some stuff in Yemen (which the Yemen govt will be taking soon anyways), some stuff in balzac, some stuff in Sask - and the white elephant known as long lake......good on them

[SebC]

Originally Posted by vektor

f'ing god damnit, I used to think Harper knew what he was doing with economics.

When, before the GST cut?

Anyways, with regards to foreign ownership, one way to look at it is the the Canadian investors who hold Nexen recieved a premium for the Chinese ones that could be re-invested in Canada. We get the Chinese investment, the Canadian investment, as opposed to just the Canadian investment. This should produce a better.

However, Roger Martin makes a good case here that the test should be reciprocity rather than net benefit. I'd suggest giving that article a read.

[bizaro86]

Originally Posted by lucky1

oh come on - thats a crock - CNOOC is not going to move in here, give all NEXEN staff big raises and open a new building - The chinese will have no doubt analyzed the current market to death - they will keep Nexen middle of the road with respect to compensation - much like STAToil did with Leismer.
There are many NA and European based companies already operating withing china - but all of these are on a partnership type basis with one of the state owned Chinese Oil companies - so, this whole thing about buying Nexen to poach its superior technology is also BS - its already being utilized on several fronts - Besides, i worked for Nexen for many years, both in canada and overseas - I can guarantee you that there is no ultra secret proprietory processes being put into play - one of the most poorly run oil companies in canada - they had to close the balzac gas plant due to drilling nothing but dry holes - they had no gas to fill the plant - poor reservoir management in yemen means they are down about 75% of the production they had just 2 years ago, poor geological assessment of the long lake reservoir has made it impossible for that plant to get to even close to advertised rates - I say let CNOOC have it - Nexen does not and will not have the capital required to get that field up to full production.....

This is basically the argument I made, only I used sentences, so I'm not sure why you're disagreeing with me. Azure was saying we can't let the talent and technology go to the Chinese, and I was saying two things.

1) If the Chinese wanted the talent it'd be easier and cheaper to hire the employees directly than buy the company.

2) Nexen doesn't have any technology they couldn't get elsewhere.

There Chinese are buying the reserves all over the world.