Petronas rejection may hurt Canadian oil and gas bids
BY SAM MAMUDI
OTTAWA -- Canada's surprise decision to block a multibillion dollar foreign bid for a local natural gas company may spell bad news for other, similar deals in the energy sector.
The Canadian government said that it would not allow Petroliam Nasional to go ahead with its proposed $5.23 billion acquisition of natural gas producer Progress Energy Resources, according to media reports.
It didn't say why it nixed the deal, but Canadian law requires such deals be of "net benefit" to the country's economy, said The Wall Street Journal. As well as frustrating Petronas' effort to buy Progress Energy, Canada's decision could mean bad news for Cnooc ,which in July offered to buy oil producer Nexen for $15.1 billion.
Petronas has so far declined to comment on the decision, according to a report agency said the Progress deal was an important step for Petronas, which is seeking to expand beyond its borders. Buying into Canada would give it a more stable country to invest in after fighting between South Sudan and Sudan led Petronas to close most of its pipelines there.
The Journal, citing people with knowledge of the Cnooc bid, said representatives for Cnooc were stunned on hearing of the rejection of the Petronas bid. These people had not detected any reservations about the deal among Canadian lawmakers before the rejection, added the paper.
The Journal said it's not known if Cnooc will change its bid for Nexen due in part to the fact that the reasons why Petronas' bid was rejected have not been made public.
Despite the rejection and what it might mean for other deals, Canada still needs foreign investment in its energy sector. Media have reported that the government said it needs roughly $650 billion of investment in its energy sector over the next 10 years.
Analysts quoted by Reuters suggested that the Petronas bid may have been blocked to increase leverage against Cnooc rather than signaling that deal may also be rejected.
The Journal's report on Saturday also suggested that other considerations may have influenced Friday's decision. Canada allows for 100% foreign ownership of oil and gas assets, while Malaysia, which own Petronas, only allows foreigners to buy up to 49% of its energy firms.
Dow Jones Newswires