View Full Version : China and India Vie for Company With Oil Fields in Kazakhstan

News Update
16-08-05, 15:47
August 16, 2005


HONG KONG, Tuesday, Aug. 16 - Chinese and Indian state-owned oil companies are trying to buy a Canadian company with oil fields in Kazakhstan, in the most direct competition yet for energy between Asia's most populous countries.

A joint venture of the China National Petroleum Corporation, China's biggest oil company, and PetroChina, its publicly traded subsidiary, offered roughly $3.2 billion late Monday for PetroKazakhstan, a person close to the negotiations said. The Oil and Natural Gas Corporation, India's main state-owned oil company, has already reportedly submitted a bid of $3.6 billion in cooperation with the steel maker Mittal Group.

PetroKazakhstan, whose shares are traded in Toronto, issued a statement from its headquarters in Calgary, Alberta, after the close of trading that it had received proposals to acquire the entire company. The company announced in late June that it had been approached by suitors, and investment bankers had identified the China National Petroleum Corporation and the Oil and Natural Gas Corporation as being interested.

While the Chinese bid appeared to be lower than the Indian bid, Chevron's successful pursuit of Unocal this summer despite a higher bid from Cnooc Ltd. of China has shown that the higher bid does not always win in a politically charged industry like energy.

The China National Petroleum Corporation already has substantial oil investments of its own in Kazakhstan, and has been trying to build a pipeline to carry the oil to China. The Chinese government has been actively courting Kazakhstan as well, partly because Beijing officials want to make sure that no Muslim insurgency develops in heavily Muslim areas of Xinjiang Province near the Kazakh border.

PetroKazakhstan has been locked in bitter disputes with the Kazakh government over its flaring of natural gas and other issues, disputes that China's alliance with Kazakhstan might be able to smooth over.

An Indian buyer of PetroKazakhstan would face a more difficult challenge in exporting oil from Kazakhstan, which does not share a border with India. Oil experts said that an Indian buyer might need to export the oil through Russia, further increasing Kazakhstan's dependence on Russia at a time when Kazakhstan, a former Soviet republic, has been trying to develop a broader array of international relationships.

"That's probably behind the cheaper bid from the Chinese," said Sam Dale, an oil industry expert in Singapore with Energy Intelligence, a New York-based newsletter publishing group.

The rival attempts to buy PetroKazakhstan underline the inherent competition between China and India for oil, even though both countries' senior officials have called repeatedly this year for cooperation.

The two countries together hold 37 percent of the world's population. India's oil imports rose 11 percent last year while China's soared 33 percent, although part of China's increase last year reflected stockpiling, and the pace of Chinese imports has started to slow this year.

Western oil executives have complained that they may find it hard to buy oil fields at commercially viable prices if bidding soars because of the involvement of state-owned oil companies that may be driven by military and strategic objectives as well as a need for profits.