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THE Canadian government has blocked Petronas’ US$5.2bn bid for energy firm Progress Energy Resources, saying it would be of no benefit to the country.

The unexpected move follows a month of fierce political debate in Canada over its energy security and sovereignty, and may mark an end to the country’s relatively open approach to foreign investment.

In a statement, Canadian industry minister Christian Paradis says he is “not satisfied that the proposed investment is likely to be of net benefit to Canada.”

Despite his decision, however Paradis claims that “Canada has a long standing reputation for welcoming foreign investment,” and insists that “the government of Canada remains committed to maintaining an open climate for investment.”

Under Canadian law, the government can put a halt to any takeover bids from companies based outside of the country, if it is not convinced that it will be a good deal for Canada. Generally, however, it has been reluctant to use these powers. The last time such a high-profile deal was blocked was in 2010, when it rejected BHP Billiton’s US$3bn bid for fertiliser company Potash Corp.

Petronas and Progress – which backed the deal – now have 30 days to appeal against the decision – time Progress president and CEO Michael Culbert says will be spent “working to determine the nature of the issues and the potential remedies.”

He adds that despite Paradis’ claims, “the long-term health of the natural gas industry in Canada and the development of a new LNG export industry are dependent on international investments such as Petronas’.”

The rejection damaged Petronas’ plan to expand its presence outside of Malaysia, and casts grave doubts on Chinese oil company CNOOC’s similar, but much more controversial, US$15bn bid for Nexen. Earlier this month Pat Martin, a politician from the opposition NDP party, claimed that approving CNOOC’s bid would be tantamount to “economic treason.”

Progress produces around 50,000 boe/d of natural gas from two main areas – the Deep Basin of northwest Alberta and the Foothills of northeast British Columbia. It owns around 506,000 ha of land in total and focuses on tight gas and Montney gas shales and silts. The company says it has reserves of 1.9tn ft³ of gas.