CNOOC'S Nexen Deal Shows How Obama Pushed Canada Toward China
FORBES: When President Barack Obama rejected the Keystone XL oil pipeline, it spurred Canada to look to China as a new partner that could serve as a market for the increasing oil production coming out of Canada’s tar sands. Now, half a year following Obama’s decision, Canada’s vital oil industry appears to be drifting to China.
CNOOC, a state-owned China oil producer, announced on Monday that it has inked a $15.1 billion deal to buy Nexen, one of the crown jewels of Canada’s oil and gas sector. The Canadian government seems poised to approve the landmark deal given Canadian Prime Minister Stephen Harper’s courtship of Chinese investment and CNOOC’s deft political maneuvers, like promising to make Calgary the head office of the company’s North American and Central American operations.
Chinese influence in Canada has become very strong in recent years. But the Nexen deal brings this trend to a whole other level and will serve as a test of Canada’s new commitment to diversify its economic dependence away from the U.S. in the aftermath of the Keystone decision. This would be a strategic setback for the U.S., which has been searching for years for secure sources of oil that are free from the political uncertainty that exists in Venezuela and the Middle East. Canada seemed like the perfect answer, a friendly and politically stable ally in America’s own backyard that had in recent years unlocked a massive new oil reserve using new technologies and innovation.
But Obama’s rejection of TransCanada Corp.’s Keystone XL Pipeline, which was designed to transport oil drawn from Canada’s tar sands down to the U.S. market, offended many Canadians. Harper responded to the snub by heading to China to start negotiating energy deals. Canada seems ready to embrace a stronger economic link with China. The historically strong U.S.-Canada relationship massively benefited both countries; it seems both countries could come to regret it if the economic and political relationship continues to weaken.