UPDATE 1-Don't rubber-stamp CNOOC-Nexen deal - Canada opposition

* NDP seeks public consultation, definition of "net benefit"

* Parliament debating deal all day Tuesday

* Opposition raises national security concerns

* Gov't promises policy statement alongside Nexen decision

(Adds national security concerns, Conservative remarks)

By Louise Egan and Randall Palmer

OTTAWA, Oct 2 (Reuters) - Canada's main opposition party on Tuesday urged the Conservative government not to rubber-stamp a bid by China's CNOOC Ltd to buy oil company Nexen Inc

without public consultations, saying opinion had hardened against the deal.

Peter Julian, energy critic for the left-leaning New Democratic Party (NDP), said the party had not yet formally decided whether to oppose the $15.1 billion takeover bid. NDP leader Thomas Mulcair said last month he had "grave concerns" about it.

"Before the government moves to rubber-stamp (the deal), consult the public," Julian told the House of Commons at the start of a debate on an NDP demand that the government launch public consultations before ruling on the deal.

There is little chance that the demand will be met, given that the Conservatives have a majority in Parliament. But the deal has generated sharp questions about how to treat bids from Communist China's state-owned enterprises.

Prime Minister Stephen Harper has said the government will take public opinion into account.

"What we're finding is public opinion is crystallizing around this deal with more and more concerns," Julian told reporters before the debate started.

Julian said that even in his Vancouver district, where oil industry affairs are usually of little interest, the Nexen deal has been the No. 1 issue for his constituents. The most recent poll showed that 69 percent of Canadians oppose the deal.

The NDP also wants public hearings into the broader issue of foreign ownership in the Canadian energy sector, particularly regarding acquisitions by foreign state-owned enterprises.

Under Canadian law, the industry minister must review any foreign investment worth more than C$330 million ($337 million) to determine whether it is of net benefit to Canada.

The NDP also wants to clarify the concept of "net benefit", which critics complain is too vague.

Treasury Board President Tony Clement, a former industry minister, said public consultations on such a corporate transaction would breach secrecy requirements.

"Basically, they're calling on the government of Canada to break the law. The law is very clear under the Investment Canada Act. There's a legal process that if you diverge from that process in any way, you're going to be subject to legal consequences," he said, according to a transcript provided by his office.

Nexen has a substantial interest in northern Alberta's oil sands, a mong the world's biggest crude reserves. The debate over how to handle the possibility of a state-owned Chinese firm extending its foothold there pits fears about national security and control of strategic resources against the need for capital.

The NDP is clearly suspicious of the deal.

"Who names CNOOC's chair?...It is named by the Politburo. It is confirmed by the Central Committee (of the Communist Party of China). That I think indicates it is very much a state-owned entity and not independent," Julian said.

Several speakers referenced a report by Canada's spy agency, the Canadian Security Intelligence Service, which said some bids by state-owned enterprises to gain control over strategic sectors of the economy could threaten national security.

On Friday, the government said it was aware of an attempt by hackers to target a domestic energy firm. It would not comment on a report that suggested a Chinese connection.

Harper has promised to clarify the government's position on foreign investment in the oil sector, particularly by state-owned investors.

"There will be a policy statement surrounding these issues and that will provide greater clarity," Natural Resources Minister Joe Oliver said in Toronto. "We expect it around the time of the Nexen decision,"

Conservative members of Parliament were largely silent, noting only that Industry Minister Christian Paradis would act in the best interests of Canada.

The biggest champion of free enterprise in the cabinet, Maxime Bernier, minister of state for small business and tourism, said: "We are a government that is open to investment."

He did not say if he favored the CNOOC bid, but asked: "When the shareholders nearly unanimously approve the sale of their shares, why would the state interfere in the private decision of an investor? That is the general principle we have to keep in mind."

(Additional reporting by Julie Gordon in Toronto; Editing by Peter Galloway and Janet Guttsman)


Messaging: randall.palmer.thomsonreuters.com@reuters.net))

Keywords: NEXEN CNOOC/