Prime Minister Stephen Harper expressed unhappiness with the decision to approve the purchase of the Canadian company Nexen by the Chinese “para-statal” company CNOOC, and suggested that it may be a one-off. This is unlikely, yet it still remains necessary to determine how best to promote and realize Canada’s national interest in the international energy sector.

The Nexen decision is not a one-off, for the simple reason that even in 2011, Chinese state-owned enterprises invested $5 billion in Canada’s resource sector, nearly one-third of the amount they spent buying oil and gas companies worldwide that year. (Complete figures for 2012 are not yet available). The $5 billion included, for example, the purchase of Daylight Energy Ltd. by Sinopec for over $2.2 billion, the Chinese company’s largest foreign acquisition that year, gaining access to the company’s shale-gas reserves.

To take another example, the Prime Minister’s visit to Beijing a year ago closely followed PetroChina’s acquisition of a stake in another shale-gas project, in British Columbia, for more than $1 billion. At least as important as the reserves themselves for Chinese investors, such purchases also permit access to advanced technology for exploration and development of the shale-gas reserves in China itself. Thus PetroChina’s partnership with Shell in British Columbia shadows a CNPC joint venture with Shell in China intended to increase the shale-gas well drilling efficiency there.

Yet any surprise at the Nexen decision would be misplaced. In Beijing, a year ago during the Prime Minister’s visit, a declaration of intent for a Foreign Investment Promotion and Protection Agreement was signed after 18 years of negotiations by Ottawa. It presumably includes a legally binding rights and obligations in China for Canadian mining companies, besides facilitating Chinese investment in Canadian industries even beyond the oil and gas sector (for example: including it includes coal, iron ore and potash). In that connection there was Also signed, also a year ago in Beijing, was a memorandum of understanding between the bank Canaccord and the Import-Export Bank of China to create a “Canada-China Natural Resource Fund” to be funded at the $1 billion to start, to facilitate just such Chinese investment in Canadian resource companies.

So questions have been asked about the degree to which Prime Minister Stephen Harper’s opening of Canadian tar sands and other resources to Chinese “para-statal” companies such as CNOOC is in Canada’s national interest. (It bears noting that Harper himself expressed some unhappiness with the decision and indicated that it could well be a one-off decision.) The independent, member-based Canadian International Council recently released a study that helps to shed light on the question.

“Nine Habits of Highly Effective Resource Economies: Lessons for Canada” was written by The Economist‘s correspondent in Canada, Madeleine Drohan, and synthesized over 160 interviews in Canada and overseas. The report concludes on with nine recommendations that show a good deal of common sense, but the most controversial of which also some points on which there was are controversy. The issues concerning foreign investment and Canada’s role as an energy powerhouse overseas were amongst the most controversial.

The first three recommendations ask the government to become better stewards of public money, promote better-targeted investment and enhance collaborative research amongst government, industry and universities. The fourth recommendation advocates a national revenue-neutral carbon tax in order to diminish uncertainty in the business environment.

The last three recommendations are mainly socially oriented. They encourage focus on alleviating poverty and promoting good governance in newly industrialized in countries, propose Canadian immigration reform away from temporary foreign workers in the direction of creating a permanent skilled work force, and suggest drafting a blueprint to integrate federal and provincial efforts in all policy domains.

It is thus the fifth and sixth recommendations that have to do with international activities. The fifth encouraged a diversification of trading partners, so that Canada does not become dependent upon any third country, implicitly including China, the way that it has been dependent upon the United States in the past. (Indeed, reports suggest that President Barack Obama’s decision last year, during the US election campaign, on the Keystone XL pipeline severely disappointed Mr. Harper and confirmed his turn to the Asia-Pacific region.)

Toward this end, says the CIC report, the government must promote national companies as global companies and modify securities laws in such a direction. At the same time, the sixth recommendation is that Canada must open itself up to foreign direct investment in order to be able to operate better on the global stage.

The $15 billion purchase by CNOOC of Nexen in fact is the biggest foreign acquisition ever by a Chinese company. But since Nexen is only Canada’s six-largest independent oil exporter and producer, and many of its assets are in fact outside Canada, objections to this acquisition might not be as strong than as those to acquisitions of other companies. CNOOC’s success in this matter shows that Chinese businessmen have learnt a few lessons on how to deal with Canada, after previous problems. Amongst the reported concessions made by the Chinese in negotiations are agreements to make Calgary its head office for its North and Central American operations, to list on the Toronto Stock exchange and to retain Nexen employees.

Also there is a deeper non-Canadian significance of China’s access through Nexen to market intelligence. Nexen operates the North Sea’s Buzzard oil field, the biggest contributor to the Forties oil blend, and this gives China access to trading that sets the price for Brent crude, So China is also is looking to become less of a price-taker on the global market, and eventually even to influence influencing on how prices for various North Sea benchmarks are calculated.

[First published in The Embassy (Ottawa).]