Canada is the new Africa in China's quest for oil
As the decision on China's $15-billion Nexen bid looms, here are some lessons that Africa's experience can teach Canadians about business with Beijing.
Canada's weakened environmental laws
May says Canada is “experiencing a loss of decades of environmental laws in order to satisfy the Chinese government and state-run oil companies,” explaining that various actors in Parliament are attempting to “weaken” environmental reviews to accommodate energy buyers in China.
Still, energy policy analysts say there would not be any added danger to Canada's environment if Ottawa brokers a deal with Beijing.
“There are generally three locations in the energy industry where environmental impacts are a risk: at the wellhead, the refinery and the point of combustion,” said energy resources fellow and engineering professor at the University of Texas at Austin, Michael Webber.
“For Canada, the risks are primarily at the point of extraction, as the refining and combustion are likely to occur in the country of the end-consumer.”
Beijing would still be beholden to Ottowa's own environmental regulations at the helm of a Canadian oil producer.
“Regardless of who the company owner is, the producer would need to obey Canadian environmental laws. That requirement won't change with a Chinese company. So, the risks of additional environmental degradation in Canada for a Chinese company shouldn't be any different than for a Canadian company,” Webber said.
South Africa's Grimm agreed.
“The key concern should be on regulation and monitoring on the Canadian side – and with these instruments in place, it does not really matter if the investor is Chinese, American or other.”
Webber noted that such a deal would “bring billions of dollars of investment to Canada from an outside investor” in the aftermath of a global recession that has Canadian unemployment hovering above seven percent.
Nexen deal: trouble for Washington
A Chinese hand on Canadian oil production could, however, stand to garner oil for China that would have otherwise been destined for the US.
“If CNOOC owns Nexen, then they will be able to sell to whichever company or country they wish once existing contracts are fulfilled. An underlying policy of CNOOC is presumably to buy access to resources,” said professor of energy policy at Britain's University of Exeter, Catherine Mitchell.
But Webber is not concerned with Washington losing its hand on Canadian oil anytime soon.
“It is possible that energy production in Canada by Chinese companies would be steered preferentially towards China rather than the United States. However, the infrastructure connecting Canada and the USA is much more advanced and built-out than the infrastructure that would connect those energy resources to ports for shipping to China,” he said.
“Thus, shifting exports from the USA towards China in a significant way would take a few years.”
A Cold War on CNOOC
Grimm called for a “more nuanced” understanding of Chinese companies amid speculation and sweeping generalization on what The Sun, in a throwback to Cold War public service announcements, called “Red China.”
“In the African context, we can see that, overall, Chinese enterprises are perfectly capable of sticking to standards, if they are properly regulated,” Grimm said.
“Not all Chinese entrepreneurs are saints, and not all of them are crooks either.”