Deirdre McMurdy

Be careful what you wish for/'Cause you just might get it
And if you get it then you just might not know
What to do wit' it, 'cause it might just
Come back on you ten-fold
Eminem


It's a safe bet that Eminem wasn't contemplating Canada's foreign investment review policy when he wrote those words. But for anyone following the $15.1 billion bid by China's state-owned oil company for Calgary-based oil company Nexen they certainly resonate.

Canada's federal and provincial governments have long had a strong wish to develop the country's oil sands. And in the last few months, there's been an equally strong wish to diversify energy export markets and transport the oil produced from northern Alberta to China rather than the U.S.

For better and for worse, both of those wishes have converged in China National Offshore Oil Corporation's friendly offer to take over Nexen. Furthermore, the Nexen deal was announced almost simultaneously with a $1.5 billion deal by China's top refiner, Sinopec Corp., to acquire a 49-per-cent stake in the North Sea operations of Talisman, one of Canada's top oil and gas exploration companies.

While the size and significance of these deals should stir up some lively debate in Canada about the country's future and who controls it, it's not likely to affect the ultimate outcome.

After the humiliating rebuff from U.S. oil company Unocal in 2005, CNOOC has to be meticulous in laying the political and market foundations for this proposed acquisition (in conferring in advance with Hill & Knowlton Strategies, CNOOC brass chose a firm with strong ties to the Conservative Party firmament.).

In addition to pre-positioning meetings with government officials, it has been careful to tick every possible box in the Investment Canada review process. That's because the ultimate criterion for approval is whether or not a foreign bid of more than $300 million for a Canadian company is of "net benefit" to Canada.

For that reason, the offer represents a solid 61 per cent premium over Nexen's current share price. CNOOC makes clear that Calgary management will be retained and that Calgary will be retained as the hemispheric head office. It further promises to boost Nexen's output by 2.7 per cent and list the company on the Toronto Stock Exchange.

Two key factors, employment and competition, aren't going to be an issue under these terms.

The catch, of course, is that "net benefit" is a deliberately vague and subjective calculation and as such, it tends to be far more affected by the prevailing political winds than by the economics of the transaction.