Chinese oil giant agrees £10bn deal for Canada's Nexen

Cnooc has agreed to buy the Canadian oil producer Nexen for $15.1bn (£9.7bn), in a deal that could make the Chinese oil giant the operator of the giant Buzzard field in the North Sea.

The state-owned oil producer, which was knocked back when it tried to buy the US oil group Unocal for $18.5bn in 2005, hopes to sell the deal to shareholders and the Canadian government by offering a hefty 61 per cent premium to Nexen's Friday stock price, pledging to retain all employees and promising to make Canada its home base for its Western hemisphere operations.

Canada can block any foreign investments worth more than C$330m (£209m) if it thinks a deal is not in the country's best interests, as it did with BHP Billiton's attempt to take over the fertiliser giant Potash Corp.

However, although the Canadian government has launched a review of the deal, as it is obliged to by law, previous deals by Chinese energy giants in Canada have not roused the same level of political hostility as Cnooc's bid for Unocal did in the US.

Nexen has oil sands and shale gas operations in Canada as well as operations in the Gulf Mexico, off West Africa and the North Sea.

Its North Sea operations include Buzzard, the largest oil field in the UK and biggest contributor to Forties crude. Forties is the largest of the four North Sea crude oil that form the Brent oil benchmark, and is the crude that usually sets the value of the benchmark Brent crude, which is used for pricing more than half the world's oil.