Thursday February 14, 2013

PM lobbied Canada over Petronas takeover deal

OTTAWA: Canadian Prime Minister Stephen Harper has reversed an initial rejection of Petronas' C$5.2bil (RM16bil) takeover of Progress Energy Resources Corp following an intervention by Datuk Seri Najib Tun Razak.

Correspondence between the two leaders showed that Malaysia promised that Petronas would invest C$68bil to C$70bil (RM209.4bil to RM215.6bil) over 30 years to develop the natural gas reserves of Calgary-based Progress, according to a Nov 2 letter obtained by Bloomberg News.

The Malaysian Prime Minister expressed concern about the rejection and reassured Harper that the Government “does not interfere with the commercial decisions and operations” of Petronas.

The diplomatic intervention showed the need for financial commitments and political hurdles facing foreign companies looking to acquire energy assets in Canada, home to the world's third largest oil reserves and the third-largest supply of natural gas.

Canada initially blocked the Petronas offer on Oct 19, saying it didn't provide the “net benefit” to the country that its foreign-takeover law requires.

Harper reversed the decision on Dec 7, at the same time he approved Beijing-based Cnooc Ltd's US$15bil (RM45bil) acquisition of Nexen Inc.

Najib dispatched Minister in the Prime Minister's Department Datuk Seri Idris Jala for a Nov 7 meeting with Canadian Finance Minister Jim Flaherty and Foreign Affairs Minister John Baird, according to a memo to Harper stamped “secret” from his top public servant Wayne Wouters.

Petronas closed its acquisition of Progress on Dec 18. Cnooc, China's biggest oil and gas producer, yesterday won approval to acquire Nexen's US assets, the last regulatory hurdle in the purchase.

Malaysia helped make the case that Petronas operates in a similar way to publicly traded companies, said Michael Culbert, chief executive officer of Progress Energy Canada Ltd.

“What Petronas really put forward was that not all SOEs (state-owned enterprise) really are exactly the same,” Culbert said yesterday.

“Their plans for Progress Energy are to have Progress have Canadian management and a fair amount of autonomy.”

In approving the Petronas and Cnooc deals, Harper said that under new rules for acquisitions by SOEs, his government would only approve further acquisitions under “exceptional circumstances”.

Canada will consider “free-enterprise principles” and “industry efficiency” in reviewing such deals, Harper said in a letter to Najib written after the Petronas offer was approved, documents showed.

In his letter to Harper, Najib said Petronas' investment in Canada would create 3,000 “direct and indirect” jobs.

Less than a week before Canada approved the deal, the companies said they would make a final decision in 2014 on a proposed liquefied natural gas facility near the coastal community of Prince Rupert, British Columbia.

The facility would cost C$9bil to C$11bil (RM27.3bil to RM33.9bil), create as many as 3,500 construction jobs and employ 200 to 300 people to operate the terminal. - Bloomberg