The move will provide the biggest test yet of the developed world's willingness to accept Chinese capital for control of key strategic resources. Seven years ago, government-controlled CNOOC led an ultimately unsuccessful effort to acquire Unocal of the US, an $US18.5 billion effort that the Chinese company withdrew amid intense political opposition in the US.

The CNOOC-Nexen deal will require regulatory approval in the US, Canada and elsewhere, a potentially tricky prospect especially in the US ahead of an election where China has been a major issue. In addition to Canada, Nexen has assets in the Gulf of Mexico and the UK North Sea.

But the energy industry has shifted in recent years, with companies around the world showing an increasing acceptance of Chinese capital as energy projects become more ambitious, expensive and technically complex. In North America, much of Chinese investment has taken the form of minority stakes, particularly in shale gas and heavy oil projects. Underscoring the growing comfort, China's state-controlled Sinopec Group separately agreed to acquire a 49 per cent stake in UK North Sea assets owned by Canada's Talisman Energy.

If completed, the deal would be the biggest overseas acquisition by a Chinese company, according to data provider Dealogic, eclipsing Aluminum Corp of China's $US14.3 billion purchase of a 12 per cent stake in mining company Rio Tinto in 2008.

CNOOC - which stands for China National Offshore Oil Corporation - will pay $US27.50 a share for Nexen, representing a 61 per cent premium to their closing price on Friday on the New York Stock Exchange.

Canada's Industry Minister said overnight that the acquisition of Calgary, Alberta-based Nexen would be subject to a federal government review, setting the stage for what may be a lengthy review process. Cnooc has proposed listing itself on the Toronto Stock Exchange and has said it would base its North American operations in Calgary as part of the Nexen deal, both moves that could alleviate some Canadian concerns.

State-owned CNOOC is China's largest offshore oil company by production. The deal would give it ownership of oil and gas reserves in western Canada, the UK North Sea, the Gulf of Mexico and offshore Nigeria.

"The acquisition reflects our strong belief in Nexen's rich and diverse portfolio of assets and world-class management and employees. This is an exciting opportunity for us to build on our existing joint venture relationship with Nexen in Canada, and to acquire a leading international platform in the process," CNOOC chairman Wang Yilin said in a statement to the Hong Kong Stock Exchange.

Nexen Chairman Barry Jackson said the company's board of directors unanimously recommended that shareholders approve the transaction.

The deal would give CNOOC greater access to hot offshore areas such as the Gulf of Mexico and West Africa, and would increase its presence in potentially lucrative but capital-intensive projects such as shale gas and Canada's oil sands.

CNOOC and Nexen are already close. Cnooc last year announced the acquisition for $US2.1 billion of Canadian oil sands producer OPTI Canada Inc. for about $US2.1 billion, making it a partner with Nexen in the Long Lake oil-sands project in Alberta. CNOOC deepened its relationship with Nexen in December 2011, when the two agreed to a joint venture deal which gave CNOOC stakes in six deepwater Gulf of Mexico wells operated by Nexen.

Those wells could be a political sticking point, said one banker who has worked with CNOOC. "That's a very politically sensitive area, particularly for the Chinese and especially in a US election year," the banker said.

Success could depend on how well CNOOC and Nexen have prepared regulators. In 2005, when it was competing for Unocal, CNOOC made a number of missteps, including trying to break up an existing pact between Unocal and Chevron. The failure of CNOOC's bid cast a pall over Chinese deal making in the US, which was quiet for years until energy companies and other began to make tentative moves to return in recent years. CNOOC officials acknowledged afterward that the company learned it must do a better job dealing with political lobbying and public relations.

Much of that nervousness in the US and elsewhere comes from the tight links between Beijing and its state-controlled oil producers. Mr Wang, CNOOC's chairman, was a former top executive at Cnooc rival China National Petroleum Corp until Beijing shuffled ranks among its big state oil companies last year. Top executives at Chinese state companies are usually lifelong government bureaucrats, and Mr Wang's career includes stints as a government official in energy-related government offices in western China.

Chinese companies have invested heavily in Canada, and particularly its resources sector, pumping in at least $US12.8 billion into companies and projects since 2009, according to Dealogic in May. Canada recently green-lighted a number of other big Chinese deals, blessing two separate $US2 billion takeovers of Canadian companies by Chinese firms last year. But the Nexen purchase would be the biggest proposed foreign investment inside Canada's oil patch by far, and will likely trigger increased scrutiny by Ottawa.

In 2010, Ottawa rejected a roughly $US39 billion bid for Potash Corp of Saskatchewan by Australia's BHP Billiton. The government never made clear its specific objections, but political opposition, especially in the province of Saskatchewan, was fierce.

Canadians have typically viewed their oil fields differently. Because Canada's oil patch is made up of many, smaller players, doing everything from conventional drilling to more complex and costly oil-sands development, attorneys and bankers say there is less worry over a foreign buyer appearing to be taking too big a chunk of a strategic industry.

Still, Canada has recently said it will tighten its foreign-takeover review process. While it has raised the bar of any review to a deal worth over $C1 billion ($956 million), it will also require more disclosure from the acquiring company.

In recent years, Canada has warmed significantly to China. That wasn't always the case. In 2004, China Minmetals Corp. entered talks to buy Canadian mining company Noranda Inc., a deal valued at the time at more than $US5 billion. The deal foundered on political opposition in Ottawa.

In July, CNOOC agreed to buy oil-sands developer, OPTI Canada, Calgary, for about $US2.1 billion.

Canadian Prime Minister Stephen Harper has recently ratcheted up his courtship of Beijing. The move coincided with a decision by the Obama administration to reject a key oil pipeline expansion that would boost crude exports from Canada to the US.

Canadian officials and industry executives were stunned, after spending years lobbying for the line. While the decision on TransCanada’s Keystone XL line was seen as a political one in Washington - and Canadian officials say they believe it will ultimately be approved after the US presidential elections - it triggered a fresh push to send oil westward to Asian markets.

Currently, pipeline executives are pushing two big new projects to ship oil to the west coast.