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UPDATE 3-Canada extends review of CNOOC-Nexen deal by 30 days

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* Canada has until Nov. 11 to decide fate of CNOOC bid

* Security, safety will form part of review, says minister

* Some fear allowing China to buy up Canadian energy assets

(Adds comments by public safety minister, energy minister,opposition, ambassador)

By Randall Palmer and David Ljunggren

OTTAWA, Oct 11 (Reuters) - Canada said it needs more time tocomplete its review of a $15.1 billion Chinese bid to take overoil and gas explorer Nexen Inc , a deal that has raisedfears about opening the Canadian energy sector to the Asianpower's state-owned companies.

The government on Thursday extended its review of CNOOCLtd's bid by 30 days, to Nov. 11. The decision comesamid a growing furor over alleged Chinese espionage in NorthAmerica that could intensify opposition to the Nexen deal.

"The proposed transaction is undergoing a rigorous review,"Industry Minister Christian Paradis said in a brief statementannouncing the widely expected extension. "The required timewill be taken to conduct a thorough and careful review of thisproposed investment."

A spokesman for CNOOC Canada Ltd in Calgary declined tocomment.

Canada is grappling with concerns that approval of the dealcould spark a flurry of mega-takeovers of Canadian energycompanies. Canada is home to the world's third-largest provenoil reserves, most of them in the western province of Alberta.

Under the Investment Canada Act, Paradis must decide whetherthe CNOOC-Nexen deal would bring a "net benefit" to Canada. Mostanalysts expect him to give the green light, with conditions.

Some inside Canada's governing Conservative Party are uneasyabout allowing Chinese state-owned companies to buy up Canadianenergy assets, accusing them of unfair business practices.Others cite what they say is China's patchy human rights record.

This week a U.S. congressional report urged Americancompanies to stop dealing with two big Chinese telecomsequipment makers, Huawei Technologies Co Ltd and ZTECorp , saying the Chinese companies couldenable Beijing to spy on U.S. communications and endanger vitalsystems.

A Canadian official suggested strongly on Tuesday thatHuawei would not be welcome to help build a secure governmentcommunications network.

Public Safety Minister Vic Toews told reporters in Calgaryon Thursday that "every transaction that is referred to cabinetis considered from a security and safety point of view."

Strategists for the Conservative Party issued a note tolegislators on Thursday stressing that "our government willalways act in the best interest of Canadians" and saying Paradiswould take into consideration views submitted by the public.

The CNOOC bid won a vote of confidence Wednesday night fromDavid Dodge, a former Bank of Canada governor. He told reportersthat Ottawa would retain control over its oil reserves becausethey will remain in Canada.

Nexen's portfolio includes operations in the oil sands,shale gas in the province of British Columbia, and other assetsspread across the globe.

Those wary of the deal say that in return for allowing CNOOCto buy Nexen, China should open up its markets to Canadiancompanies and make it easier for them to operate there.

Guy Saint Jacques, Canada's new ambassador to China, said ina speech in Montreal on Thursday that "we are resolved to ensurethat Canadian firms have access to markets ... like China's." Healso said he would press Beijing on human rights.

Paradis must weigh the takeover concerns against the energysector's pressing need for foreign investment. Ottawa saysCanada needs at least C$650 billion ($663 billion) of energyinvestments over the next decade, and much of it will have tocome from outside the country.

A CNOOC acquisition of Nexen would be the largest Chineseforeign takeover ever.

The main opposition New Democrats - who oppose the deal asit is currently structured - welcomed the 30-day extension andcalled for public consultations.

"There are still many unanswered questions and it's theConservatives' job to respond to these questions before sellingour resources to the highest bidder," said the party's naturalresources spokesman, Peter Julian.

Nexen shares initially dipped 10 cents but at 2.35 p.m.(1835 GMT) were up 10 cents to C$25.25 on the Toronto StockExchange, 8 percent below CNOOC's cash offer of $27.50 a share.

"We believe the potential for downward pressure on the stockexists, as speculators may take the extension (and potentialadditional extensions) as a signal the deal may not beapproved," GMP Securities analyst Ryan Savage said in a note.

Last week, Canada extended its review of a C$5.2 billion bidby Malaysia's Petronas for natural gas producer Progress EnergyResources Corp . The delay took some analysts bysurprise as few expect much opposition to the proposal from theMalaysian state-owned company.

Paradis can announce another 30-day extension beyond Nov.11, but only if both CNOOC and Nexen agree.

Ottawa last blocked a foreign takeover deal in 2010 when itstunned markets by preventing Australia's BHP Billiton Ltd

from buying fertilizer producer Potash Corp .

($1=$0.98 Canadian)

(Additional reporting by Louise Egan, Euan Rocha, Scott Haggettand Leila Lemghalef; Editing by Frank McGurty and John Wallace)

((david.ljunggren@thomsonreuters.com)(+1 613 235 6745)(fax +1613 235 5890)(Reuters Messaging:david.ljunggren@thomsonreuters.com))

Keywords: NEXEN CNOOC/CANADA