Abstract
Prime Minister Harper’s statement following the 2012 takeover of Nexen by CNOOC that “going forward,
the Minister will find the acquisition of control of a Canadian oil-sands business by a foreign state-owned
enterprise to be of net benefit, only in an exceptional circumstance” represented a major shift in the
Canadian government’s attitude towards foreign direct investment into the energy sector by state owned
enterprises. While the policy announcement was intended to clarify application of the Investment Canada
Act (ICA), it has done the opposite. By adding the term “exceptional net benefits” when reviewing state
owned enterprise’s bids for control of Canadian oil sands companies, the Canadian government has unfairly
targeted Asian SOEs and confused the use of the net benefits test when assessing foreign investments. The
resulting policy has had a negative effect on the development of the oil sands and on investor sentiment
towards Canadian energy projects. Evidence suggests that the policy change has had negative consequences
on investment activity including: increasing investment costs for acquirers, increasing costs of capital and
decreasing available capital for junior oil and gas companies, and creating uncertainty in the minds of
foreign investors leading to them questioning Canada as a place for future investment.
Refereed
Yes
