China National Petroleum Corp has outbid India's Oil and National Gas Corp (ONGC) by offering US$4.18 billion for Canadian-based PetroKazakhstan, a rare major win for a mainland firm in recent years as Beijing reaches out for international oil and gas assets to fuel its booming economy.
China National yesterday said its wholly owned CNPC International had offered US$55 a share for all the shares of PetroKazakhstan, the second-largest oil producer in the Central Asian country.
The offer represented a 21.1 per cent premium to the New York, Toronto, London and Frankfurt-listed PetroKazakhstan's last traded price before its shares were suspended.
CNPC's acquisition agreement with PetroKazakhstan has been approved by the boards of both firms but is subject to approval by two-thirds of PetroKazakhstan shareholders at a meeting next month. It also needs to be sanctioned by the Kazakh government.
Neither the Indian firm's last offer price nor how CNPC, the parent of listed PetroChina, would finance its purchase was known. An insider said CNPC's financial adviser provided a standby letter of credit to support its purchase.
ONGC was unavailable for comment. Spokespeople of CNPC, Citigroup, PetroKazakhstan and its adviser Goldman Sachs declined to comment.
ONGC offered US$3.6 billion last week, the New York Times reported.
CNPC's deal comes on the heels of fellow oil producer CNOOC's failed bid to acquire Unocal Corp, the United States' ninth-largest oil firm, losing out to Chevron Corp.
It also came just over two years after China Petrochemical Corp - parent of China Petroleum & Chemical Corp - and CNOOC missed out on buying an 8.3 per cent stake in the North Caspian Sea project from British Gas. Their bids were pre-empted by global oil majors that have stakes in the project.
'This time around, the [world] majors seemed not interested in getting into a bidding war with CNPC as they know that it is entrenched in Kazakhstan and quite determined to win,' said Fitch Ratings associate director Ma Shang.
Unlike CNPC, which is wholly state-owned, the foreign majors were listed and must consider shareholders' interests, he added.
CLSA Securities China oil and gas research director Gordon Kwan said CNPC's aggressive bidding strategy had probably kept ONGC and other potential bidders at bay.
'CNPC has strategic synergy with PetroKazakhstan and the support of the Kazakh government. If the other oil majors want to bid, it may be pre-empted by the Kazakhstan government,' Mr Kwan said.
CNPC owns Kazakhstan's third-largest crude producer Aktobenmunaigaz wholly and is building an oil pipeline from China to that country which can be linked to PetroKazakhstan's oil fields.
With proved and probable oil and gas reserves of 549.8 million barrels of oil equivalent, the PetroKazakhstan deal represents 2.5 per cent of CNPC's proved oil and gas reserves of about 19 billion barrels.