China’s CNOOC Ltd. said on Friday it expects its $15.1-billion (U.S.) takeover of Canadian oil and gas producer Nexen Inc. to close in the first quarter of 2013 at the earliest, a move that could be aimed at giving U.S. regulators more time to approve a sensitive aspect of the deal.
The company is still awaiting U.S. approval over its purchase of Nexen assets in the Gulf of Mexico after Canadian officials approved the deal earlier this month.
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A ruling by the Committee on Foreign Investment in the United States, or CFIUS, is seen the main remaining regulatory hurdle for CNOOC and Nexen, which resubmitted applications to the committee in late November.
“The closing date of the deal is closely linked with the approval result. Now it looks like it is not practical to close by end of the year. So now we expect it to be closed at the earliest in the first quarter of next year,” said a CNOOC official with the firm’s investment relations office.
The official declined to comment on the status of CFIUS approval.
U.S. companies face barriers to invest in around 100 Chinese sectors, restricting their opportunities in the world’s second-largest economy. Chinese firms wanting to invest in the U.S. fear a political backlash in Congress and being blocked on national security grounds by CFIUS.
One issue the committee will examine is whether Nexen’s assets are too close to sensitive U.S. military areas, CFIUS experts have said.
Though just a fraction of Nexen’s reserve base and production, an acquisition of the Canadian firm’s Gulf of Mexico assets would give CNOOC a foothold in the world’s prized deep-water oil patch.
Industry officials are optimistic about winning U.S. approval, arguing that the Gulf of Mexico assets are relatively small, but carry huge exploration risks and require massive spending.
“I don’t foresee many political hurdles from the U.S. … CNOOC, which already holds U.S. onshore assets with Chesapeake, will just be one of hundreds of firms already working in the area,” said one Beijing-based official with direct knowledge of CNOOC’s overseas investment.
Judging from the wells already sunk by Nexen in the region, the exploration and development risks could outweigh the economic returns, said the official.