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CNPC bid shows China's energy-source thirst: analysts

A bid by China National Petroleum Corporation (CNPC, 中國石油天然氣) to buy Calgary-based Petro-Kazakhstan Inc for US$4.18 billion reflects China's continued thirst for overseas energy sources, analysts said yesterday.

Asia's second-largest economy has roared ahead since the beginning of the year, expanding by 9.5 percent in the first half compared with the same period last year, and energy supplies are reaching exhaustion point.

"Oil has become a bottleneck and it will affect the development of the Chinese economy," said Wang Zhao, an economist with the State Council's Development Research Center, a government think tank.

"The United States has the same problem and has actively been buying oil from other countries. In future, China will do as the United States has done," he said.

The bid for PetroKazakhstan and its 550 million barrels of proved and probable oil equivalent reserves appears to have trumped a rival offer from India's Oil and Natural Gas Corp.

This may suggest the beginnings of a race for scarce energy resources between Asia's two largest emerging economies, according to analysts.

"India's needs for energy or oil imports are much smaller than China's, but India's economy is growing and they need, too, to buy resources," said David Zweig, a China expert at the Hong Kong University of Science and Technology.

"To continue to grow, both of these countries need to gain access to resources," he said.

This time around, at least, analysts said CNPC had a much stronger case than the Indian rival.

This is not only because of its higher bid but also because PetroKazakhstan's reserves are closer geographically to China, which also works to Kazakhstan's advantage.

"There is a synergy effect. CNPC will invest a lot in the infrastruc-ture," said Gideon Lo, oil analyst with DBS Vickers in Hong Kong.

CNPC has already invested in the region and earlier acquired a 60 percent stake in Aktobemuaigaz, which operates the Aktobe field in northwest Kazakhstan.

Analysts also argued transporting PetroKazakstan's oil to China will be easier and cheaper.

China and Kazakhstan are already in the process of exploiting this geographic proximity, developing a 3,000km pipeline that is to bring Central Asian oil to Chinese homes and factories.

"The Kazakhstan-China crude-oil pipeline is also an important catalyst to push oil business cooperation between the two countries," said Ma Shang, an oil analyst from Fitch Ratings.

CNPC's bid for PetroKazakhstan follows an unsuccessful US$18.5 billion bid by China National Overseas Oil Corporation (CNOOC, 中國海洋石油) to buy the US-based Unocal Corp.

The price CNPC is willing to pay, with its 24.2 percent premium over PetroKazakhstan's share price in New York, could have been prompted by the recent debacle, according to observers.

CNPC itself was eager to signal that this deal was different, and better thought through, than CNOOC's take-over attempt.

"We have been involved in talks with PetroKazakhstan about the purchase for a long time, and gradually worked out the successful bid," said Han Xuegong, a veteran senior analyst with CNPC, according to the China Daily.

"[It's] not like CNOOC's sudden intrusion into the highly China-sensitive US energy market," he said.
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