The surprise rejection of Malaysia's bid for Progress Energy Resources Corp. has focused attention on Cnooc Ltd.'s play for oil sands producer Nexen Inc., as the federal Conservative government seeks to reassure markets that Canada is open to foreign investment.

"Upcoming energy transactions should provide a better picture as to the environment for foreign investment in Canada," Greg Pardy, co-head of global energy research at RBC Capital Markets, said in a note Sunday to clients.

"In our minds, the need for foreign investment to develop Canada's vast oil, oil sands and shale gas resources, and the importance of diversifying its exports into Asia would auger against a resource protectionist policy. Nonetheless, the bar on meeting the net benefits test appears to have been raised."

Much remains unknown about the federal government's decision late Friday to block Malaysia's bid for Progress.

Christian Paradis, Canada's Minister of Industry, confirmed in a statement that he was "not satisfied that the proposed investment is likely to be of net benefit to Canada."

A report in the Globe and Mail suggests the determination was made after Petronas refused a request by the federal government to extend its review of the $6-billion acquisition for a second time. Petronas now has 30 days under federal rules to tweak its bid for Calgary-based Progress.

The deal was widely billed as a test case for how Ottawa would treat Cnooc's $15.1-billion bid for Nexen.

The rejection comes as the federal Conservative government aggressively courts international investment it says is needed to develop capital intensive shale gas and oil sands projects, as well as export infrastructure.

"You certainly cannot build out the oil sands at the pace and scale we're talking about without accessing non-Canadian capital," Jim Prentice, a former Conservative cabinet minister turned banker, said last month.

Speaking to a business audience in Calgary, he warned that rejecting Cnooc's bid for Nexen could potentially harm Canadian efforts to access foreign markets and imperil a budding trade relationship with China.

"We are in the midst of building a strategic partnership with China, and I think it would be, frankly, a very bad time to turn around in the middle of the road," he said.

Jim Flaherty, Canada's Finance Minister, sought on Sunday to reassure those who took Friday's decision as a sign that Cnooc's bid for Nexen was doomed.

"We have made it clear; we believe in foreign direct investment in Canada," he told CTV, Bloomberg reports. "The proposals have to be correct, and certain conditions from time to time will be proposed by the minister of industry and it's his responsibility, and I think that's what's going on in this particular application."