UPDATE 2-Canada opposition MP: treason to approve Nexen takeover

* MP makes charge during debate on CNOOC bid for Nexen

* 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

(Releads with treason remark, paragraphs 1-5)

By Louise Egan and Randall Palmer

OTTAWA, Oct 2 (Reuters) - Canada's Conservative government will commit treason if it approves a $15.1 billion bid by China's CNOOC Ltd to buy Canadian oil company Nexen Inc , opposition Member of Parliament Pat Martin said on Tuesday.

Martin was speaking during debate in the House of Commons on a motion by his left-leaning New Democratic Party demanding that the government hold public consultations before deciding whether to approve the deal.

He said China had displaced Canadian jobs in the garment industry in his electoral district and in the high-tech sector, "and now we're going to let the nation state of China come in and buy up our natural resources as well?" he asked.

"Anybody that considers allowing this deal, I accuse them of economic treason," the maverick MP said.

His position is not the formal policy of the NDP, though party leader Thomas Mulcair has voiced "grave concerns" about the Nexen takeover.

The NDP forced an all-day debate on the deal on Tuesday, and

the party's energy critic, Peter Julian, urged the government not to give it routine approval.

"Before the government moves to rubber-stamp (the deal), consult the public," Julian told the House.

There is little chance that the demand for consultation will be met, given that the Conservatives have a majority in Parliament. But the debate has raised the prominence of the transaction, which 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," he said, according to a transcript provided by his office. "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."

Nexen has a substantial interest in northern Alberta's oil sands, among 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."

($1=$0.98 Canadian)

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


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

Keywords: NEXEN CNOOC/