Canadian Minister of Industry Christian Paradis said in a letter to Malaysian energy company Petronas that he was "not satisfied" that a $6 billion takeover bid for Canada's Progress Energy was in the national interest.
Paradis said Petronas has 30 days as of Oct. 19 to change proposal, after which he would approve the acquisition or stand by his initial decision. He declined to elaborate on what led to his decision.
Sajal Kishore, director of Asia-Pacific utilities at Fitch Ratings, told energy reporting website Rigzone the industry wasn't expecting that reaction from the Canadian minister.
"Industry watchers were expecting the Progress-Petronas deal to go through, but it was knocked down," he said. "This came as a surprise to many market players."
Kishore said the minister's position on the Progress deal may cast a shadow over a similar proposal by China National Offshore Oil Corp. to takeover Canadian energy company Nexen. Both deals have the backing of their respective shareholders.
"These state-owned enterprises (Petronas and CNOOC) will probably have to offer more. In the end, I believe that economics will outweigh nationalism," said Kishore.