Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

Malaysia PM Lobbied Canada on Petronas Bid for Progress

Malaysia Lobbied Canada on Petronas-Progress Bid, Documents Show
The Petronas Twin Towers stand illuminated against the skyline at dusk in Kuala Lumpur. The Petronas investment may let Progress Energy Resources Corp. add a third train and expand its LNG throughput by 50 percent to three billion cubic feet per day. Photographer: Goh Seng Chong/Bloomberg

Malaysian Prime Minister Najib Razak asked his Canadian counterpart Stephen Harper to reverse the initial rejection of Petroliam Nasional Bhd.’s C$5.2 billion ($5.2 billion) takeover of Progress Energy Resources Corp., correspondence between the two leaders shows.

Najib wrote to Harper promising that Petronas, as the country’s state-owned oil company is known, would invest C$68 billion to C$70 billion over 30 years to develop the natural gas reserves of Calgary-based Progress, according to a Nov. 2 letter obtained by Bloomberg News under Canada’s freedom-of-information law.

Najib expressed concern about the rejection and reassured Harper that the Malaysian government “does not interfere with the commercial decisions and operation” of Petronas, the documents show.

The diplomatic intervention shows the need for financial commitments and political hurdles facing foreign companies looking to acquire energy assets in Canada, home to the world’s third largest oil reserves and the third-largest supply of natural gas.

Canada initially blocked the Petronas offer on Oct. 19, saying it didn’t provide the “net benefit” to the country that its foreign-takeover law requires. Harper reversed the decision Dec. 7, at the same time he approved Beijing-based Cnooc Ltd.’s $15.1 billion acquisition of Nexen Inc.

Najib dispatched one of his cabinet ministers, Idris Jala, for a Nov. 7 meeting with Canadian Finance Minister Jim Flaherty and Foreign Affairs Minister John Baird, according to a memo to Harper stamped “secret” from his top public servant, Wayne Wouters.

Final Hurdle

Petronas closed its acquisition of Progress on Dec. 18. Cnooc, China’s biggest oil and gas producer, yesterday won approval to acquire Nexen’s U.S. assets, the last regulatory hurdle in the purchase.

The Malaysian government helped make the case that Petronas, which publishes quarterly financial results, operates in a similar way to publicly traded companies, said Michael Culbert, chief executive officer of Progress Energy Canada Ltd.

“What Petronas really put forward was that not all SOEs really are exactly the same,” Culbert said in a telephone interview from Calgary yesterday. “Their plans for Progress Energy are to have Progress have Canadian management and a fair amount of autonomy.”

Jala wasn’t immediately available for comment when phoned on a public holiday in Malaysia yesterday. A spokesman for Petronas, Azman Ibrahim, didn’t immediately respond to an e-mail seeking comment.

Carl Vallee, a spokesman for Harper, declined to comment on the letters and referred to Harper’s Dec. 7 statement.

‘Exceptional Circumstances’

In approving the Petronas and Cnooc deals, Harper said that, under new rules for acquisitions by state-owned enterprises, his government would only approve further acquisitions of oil-sands operations under “exceptional circumstances.”

Canada will consider “free-enterprise principles” and “industry efficiency” in reviewing such deals, Harper said in a letter to Najib written after the Petronas offer was approved, documents show.

Formal commitments made by foreign acquirers to invest in Canada in exchange for government approval typically don’t last longer than three years, said Peter Glossop, a partner at Toronto-based law firm Osler, Hoskin & Harcourt LLP.

“My guess is that the Malaysian prime minister was trying to indicate the sheer enormity of the dollar commitment over a long period of time,” he said. “I’d be surprised if that was a formal commitment made by the company.”

Generous Commitments

Still, state-owned enterprises will probably have to make more generous commitments to invest in Canada under the government’s new rules, said Glossop. “There is definitely going to be a requirement to commit more.”

In his letter to Harper, Najib said Petronas’ investment in Canada would create 3,000 “direct and indirect” jobs.

Less than a week before Canada approved of the deal, the companies said they would make a final decision in 2014 on a proposed liquefied natural gas facility near the coastal community of Prince Rupert, British Columbia. The facility would cost C$9 billion to C$11 billion, create as many as 3,500 construction jobs and employ 200 to 300 people to operate the terminal, according to the project’s website.

Gas producers in British Columbia’s Montney Shale region, far from North American population centers, are seeking higher prices in Asian markets for the heating and power-plant fuel by proposing to liquefy the gas for shipment by tanker.

Progress is the second-largest holder in the Montney Shale, one of Canada’s biggest proven shale-gas reserves with an estimated 49 trillion cubic feet. Progress would have been unable to develop its land without capital from Petronas, Culbert said when the takeover was announced in June.

Progress initially planned to build two smaller LNG production trains, Culbert said yesterday by phone. The Petronas investment may let Progress add a third train and expand its LNG throughput by 50 percent to three billion cubic feet per day, he said.

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.