Canada embracing China’s post-Keystone tar sands bid

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China’s bid for a bigger stake in the booming tar sands oil fields of Canada has some American lawmakers flustered, but the deal is likely to be approved anyway by Canadian officials fed up with Washington’s delays on the stalled Keystone XL pipeline.

China’s state-run Chinese National Offshore Oil Corporation (CNOOC) has offered $15.1 billion for Nexen, a Canadian firm with extensive assets in the Alberta tar sands.

It’s CNOOC’s second attempt to upgrade its presence in the North American energy market after the Chinese firm dropped a hostile takeover of California’s Unocal in 2005 amid concerns from Washington lawmakers that the deal posed a threat to U.S. national security.

CNOOC already owns minority stakes in Canadian firms, but the Nexen deal would give it a majority stake in the Calgary, Alberta-based company.

“This is a friendly transaction, and that’s different from 2005,” a source close to CNOOC said in an interview. “Both companies want to see this deal happen, and both are working together to get the necessary regulatory approvals. That’s far different from the previous (Unocal) deal.”

The Canadian government still has to approve the deal, but it was brokered by Prime Minister Steven Harper after the Obama administration put the Keystone XL pipeline on hold. The Canadians want partners willing to help them develop the oil-rich tar sands now rather than later.

Canada’s approval process is likely to be fast-tracked, despite complaints from Washington, especially Sen. Charles E. Schumer, New York Democrat, and Rep. Edward J. Markey, Massachusetts Democrat, two lawmakers who want to scuttle the deal unless the Chinese make concessions on opening closed markets.

“We’re going to take a good look at it,” Hon. Rob Merrifield, a member of the Canadian Parliament, said recently during a speech at the U.S. Chamber of Commerce. But the lawmaker made it clear that Chinese investment is welcome in Canada: “We’re going to want more trade with China.”

The deal offers China access to North American energy expertise and resources and gives Canada much-needed capital to better develop the tar sands.

CNOOC, with a market capitalization of $88 billion, is a much bigger company than Nexen at $13 billion — it can afford to produce more oil.

For the Canadians, more drilling means more jobs and tax revenue.

“They have more money to put behind it,” said the source close to CNOOC.

Mr. Schumer and Mr. Markey have suggested the Obama administration can block the Nexen deal because the Canadian firm has U.S. investments, but analysts say the company is likely to sell U.S. assets if Washington tries to step in.

Business leaders and Republican lawmakers have long warned that U.S. delays on Keystone would open the door for China, where energy demand is soaring.

Losing the inside track on the tar sands oil represents a lost opportunity for the United States to lower domestic energy prices and reduce its dependence on overseas oil, critics of the Obama administration say.

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