The Canadian government yesterday blocked Malaysian state oil company Petronas' $5.12-billion takeover bid for Progress Energy Resources Corp, a move that could also indicate where the proposed $15.1-billion bid for Canada's oil producer Nexen Inc by China's Cnooc is headed.

''I can confirm that I have sent a notice letter to Petronas indicating that I am not satisfied that the proposed investment is likely to be of net benefit to Canada,'' said industry minister, Christian Paradis in a statement.

"Due to the strict confidentiality provisions of the Investment Canada Act, I cannot comment further on this investment at this time," Paradis added.

Early this month, the Canadian government had extended its review of Petronas bid for the Canadian gas producer by two weeks as the country decides on how to deal with the recent surge of acquisitions of Canadian resource companies by overseas firms.

Petronas now has 30 days to appeal or give more sops so that the government could make a final decision.

In late June, Petronas' Canadian subsidiary, Petronas Carigali Canada Ltd, had offered to buy Progress for C$20.45 per share, or $4.7 billion– and about $5.4 billion, including debt. (See: Malaysia's Petronas to buy Canada's Progress Energy for $5.4bn)

In July, Petronas raised its offer by 8 per cent to $5.12 billion after the Calgary-based company said that it is talks with an unnamed "multi-national oil company."

Although Progress Energy did not reveal the name citing confidentiality agreements, several media reports speculated that Royal Dutch Shell could be the mystery suitor since it had announced plans to build a liquefied natural gas export terminal near Progress' assets located in northeast British Columbia and northwest Alberta.

Progress Energy holds approximately 900,000 net acres of Montney rights over its entire British Columbia and Alberta land base, making it one of the largest Montney land rights holders.

Petronas, one of the world's largest producers and shippers of supercooled LNG fuel, had said the deal builds on an arrangement between both companies to develop some of Progress' shale gas reserves and to develop a liquefied natural gas (LNG) export facility in western Canada.

But analysts did not expect the Canadian government to block the Petronas-Progress Energy deal, but say that the transaction must have received greater review after China's state-owned oil company Cnooc last month launched a $15.1-billion bid for Canada's sixth-largest oil producer Nexen.

Canada, home to the world's third-largest proven oil reserves, is worried that overseas companies recently have made a series of acquisitions of mid-size Canadian energy companies. They fear that their natural resources will be in the control of foreign companies.

Recently, Canada has blocked a few deals in the natural resources sector – the largest being the BHP Billiton's $39 billion bid for Potash Corp, the world's largest fertilizer company.