Three weeks ago, corporate China's ambitions to secure strategic oil and gas reserves suffered a humiliating setback when CNOOC withdrew its US$18.5 billion takeover bid for California's Unocal. That effort demonstrated vaulting ambition since the mainland's No 3 oil firm knew it faced a formidable foe in market giant Chevron.
By contrast, China National Petroleum Corp (CNPC) is no minnow and Kazakhstan is a very different place from California. While counter-offers could yet be received, China's biggest oil firm on Monday won acceptance for a US$4.18 billion deal to take over the Canadian-controlled PetroKazakhstan.
Beijing has invested much in its relations with Central Asian nations through trade deals, generous development financing and political succour to neighbour regimes facing Islamic insurgent groups. CNPC is developing a pipeline from Kazakhstan to western China, making it a natural buyer of the assets. The valuation may be rich and the Astana government could yet intervene in the deal, but CNPC is unlikely to face the kind of opposition CNOOC endured in Washington. Since PetroKazakhstan oil reserves amount to just 2 per cent of those held by CNPC, the deal carries relatively low risk.
A possible wild card is Moscow's influence since a Russian company, Lukoil, is a partner in PetroKazakhstan's fields. CNPC is structuring the takeover as a joint-venture with its listed offshoot, PetroChina - which will get no preferential financing from the central government. Criticism that CNOOC received informal subsidies through cheap loans was a barb with the potential to reverberate to other state firms seeking overseas acquisitions.
The deal highlights the brewing rivalry between Asia's two great developing economies. India's state-run company, ONGC, has reserved the right to counter-bid for PetroKazakhstan and will likely be a competitor in subsequent efforts to secure strategic oil reserves. New Delhi, like Beijing, has a strategic priority to reduce dependence on Middle Eastern oil, with Central Asia being the obvious partner.
High oil prices mean that such corporate deals will remain at the forefront of international relations for the foreseeable future. Beijing has a legitimate interest in reducing its reliance on Middle East oil - now accounting for more than 50 per cent of its imports - and turning to neighbours such as Kazakhstan as steady long-term sources of supply. Victory would be especially sweet since rival Sinopec was squeezed out of a Kazakhstan deal three years ago after major foreign oil companies exercised rights of first refusal.
A successful takeover would mean CNPC has executed China's largest foreign corporate acquisition. The fact that it is chewing off a bite-sized portion and attempting the feat from a position of financial strength makes good business sense. It also offers an improved role model to would-be mainland acquisitors.