China's biggest state-owned oil firm has reached an agreement to buy a major oil producer in neighboring Kazakhstan for $4.2 billion -- a victory in Beijing's campaign to secure foreign energy supplies for its booming economy.
The proposed acquisition of PetroKazakhstan Inc., a Canada-based company, by a unit of China National Petroleum Corp., comes three weeks after another Chinese oil company, CNOOC Ltd., dropped its bid for Unocal Corp. amid opposition from U.S. politicians.
The deal, which still requires the approval of PetroKazakhstan's shareholders, would be the biggest acquisition yet in a string of Chinese corporate takeovers overseas.
CNPC International Ltd. agreed to pay $55 a share -- a 21% premium over PetroKazakhstan's closing stock price Friday. Shares of PetroKazakhstan on Monday climbed $8.35, or 18%, to $53.75.
The high price reflects China's desire to secure energy and to cement ties with Central Asia, said Paul Sampson, senior correspondent for London-based Energy Intelligence Group Inc., publisher of the industry publication Oil Daily.
"They see the need to tie up future energy supplies as a matter of national security, and so there is a certain logic behind this," Sampson said.
The fate of PetroKazakhstan may not be sealed, however.
A joint venture of ONGC Videsh, a unit of Oil & Natural Gas Corp. of India, and London-based steel billionaire Lakshmi Mittal may place a counter-bid for PetroKazakhstan, an executive at ONGC said.
"This is not the end of the game," said the executive, who asked to remain anonymous. "The deal is still not wound up."
In a conference call, PetroKazakhstan Chief Executive Bernard Isautier hinted that there had been "other parties" interested in acquiring his company, but he declined to discuss their identity or seriousness.
China is trying to increase its role in Central Asia in part because of unease at the presence of U.S. forces in the former Soviet region that borders Afghanistan.
Beijing is especially interested in Kazakhstan, which is expected to become one of the world's leading oil producers. The discovery of the huge Kashagan oil field on its Caspian Sea coast in 2000 prompted some in the industry to call it the "Kuwait of Central Asia."
Chinese President Hu Jintao visited Kazakhstan in July and signed a pact with Kazakh President Nursultan Nazarbayev to develop a strategic partnership.
The two governments already are partners in the Shanghai Cooperation Organization, a six-nation security group led by Beijing and Moscow that is meant to combat Islamic extremism in Central Asia.
Elsewhere, China has signed a multibillion-dollar series of deals to develop oil fields or to acquire oil and gas from countries as far-flung as Sudan, Venezuela and Australia.
The biggest Chinese foreign acquisition to date has been Lenovo Group's $1.25-billion purchase of IBM Corp.'s PC business this year.
But that sum was dwarfed by the $18.5 billion that CNOOC offered for Unocal. CNOOC dropped its bid Aug. 2 amid complaints that the purchase could threaten national security in the United States.
Calgary, Canada-based PetroKazakhstan has all of its production in Kazakhstan, where it says it has reserves of 550 million barrels. Kazakhstan exports about 800,000 barrels of oil a day.