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

* 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 to complete its review of a $15.1 billion Chinese bid to take over oil and gas explorer Nexen Inc , a deal that has raised fears about opening the Canadian energy sector to the Asian power's state-owned companies.

The government on Thursday extended its review of CNOOC Ltd's bid by 30 days, to Nov. 11. The decision comes amid a growing furor over alleged Chinese espionage in North America that could intensify opposition to the Nexen deal.

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

A spokesman for CNOOC Canada Ltd in Calgary declined to comment.

Canada is grappling with concerns that approval of the deal could spark a flurry of mega-takeovers of Canadian energy companies. Canada is home to the world's third-largest proven oil reserves, most of them in the western province of Alberta.

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

Some inside Canada's governing Conservative Party are uneasy about allowing Chinese state-owned companies to buy up Canadian energy 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 American companies to stop dealing with two big Chinese telecoms equipment makers, Huawei Technologies Co Ltd and ZTE Corp , saying the Chinese companies could enable Beijing to spy on U.S. communications and endanger vital systems.

A Canadian official suggested strongly on Tuesday that Huawei would not be welcome to help build a secure government communications network.

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

Strategists for the Conservative Party issued a note to legislators on Thursday stressing that "our government will always act in the best interest of Canadians" and saying Paradis would take into consideration views submitted by the public.

The CNOOC bid won a vote of confidence Wednesday night from David Dodge, a former Bank of Canada governor. He told reporters that Ottawa would retain control over its oil reserves because they will remain in Canada.

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

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

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

Paradis must weigh the takeover concerns against the energy sector's pressing need for foreign investment. Ottawa says Canada needs at least C$650 billion ($663 billion) of energy investments over the next decade, and much of it will have to come from outside the country.

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

The main opposition New Democrats - who oppose the deal as it is currently structured - welcomed the 30-day extension and called for public consultations.

"There are still many unanswered questions and it's the Conservatives' job to respond to these questions before selling our resources to the highest bidder," said the party's natural resources 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 Stock Exchange, 8 percent below CNOOC's cash offer of $27.50 a share.

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

Last week, Canada extended its review of a C$5.2 billion bid by Malaysia's Petronas for natural gas producer Progress Energy Resources Corp . The delay took some analysts by surprise as few expect much opposition to the proposal from the Malaysian 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 it stunned 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 Haggett and Leila Lemghalef; Editing by Frank McGurty and John Wallace)

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