Nexen, a mid-tier Canadian energy company, operates in western Canada, the Gulf of Mexico, the North Sea, Africa and the Middle East, with its biggest reserves in the Canadian oil sands. It produced an average of 213,000 barrels of oil a day in the second quarter of this year.

Acquisitions must be deemed a "net benefit" under the Investment Canada Act. Concerns have been raised by lawmakers about a takeover by a state-owned Chinese firm but the deal has garnered support from the premier of Alberta where Nexen is based. Analysts say it will likely be approved because more than 70% of Nexen's assets are outside Canada.

Political scientist Wenran Jiang said the challenge for Ottawa will be to show consistency in how it applies the Investment Canada Act's key net benefit test to foreign deals.

"They will have to appear that they use the same set of rules to evaluate, rather than using different tailor-made rules," said the senior fellow at the Asia Pacific Foundation of Canada.

Paradis has extended the review of the CNOOC-Nexen deal until mid-November. The reviews can be extended by further 30-day increments, with the buyer's consent.

While some foreign takeovers are approved in Canada, the Conservative government rejected Anglo-Australian BHP Billiton's ( BHP) hostile takeover bid for Potash Corp. ( POT) in 2010 and the sale of Vancouver-based MacDonald, Dettwiler and Associates' space-technology division to an American company in 2008. In the case of Potash Corp., the local Saskatchewan provincial government was against the foreign takeover of a company that controls 25% of the world's supply of potash. A federal election also loomed at the time.

Prime Minister Stephen Harper's Conservative government has allowed Chinese companies to take stakes in energy companies and has made trade with China a top priority in recent years. However, Harper has said the Nexen-CNOOC deal "raises a range of difficult policy questions."

At a news conference in Senegal last week, Harper said there's a national security angle that factors into Canada's relationship with China, calling it important but complex.

Jiang said the perception of Chinese firms compared with other state-owned counterparts is unfair in many ways.

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