BEIJING, Aug. 23 -- The nation's largest oil and gas producer, China National Petroleum Corp (CNPC), yesterday reached an initial agreement with PetroKazakhstan Inc to buy the Canadian-registered company for US$4.18 billion, topping the bid from an Indian rival.

    "CNPC, through its wholly owned subsidiary China National Petroleum Corporation International (CNPCI), has participated in acquiring PetroKazakhstan (PK)," the Beijing-based oil giant said in a statement yesterday.

    CNPC, the State-owned parent of Hong Kong-listed PetroChina, and PK have entered into an Arrangement Agreement whereby the Chinese oil firm will pay US$55 a share, or 21 per cent more than its closing share price on Friday, PetroKazakhstan said in a statement yesterday.

    India's Oil & Natural Gas Corp also bid for the company.

    The board of directors of PetroKazakhstan recommended its shareholders accept CNPC's offer and agreed on a US$125 million break-up fee.

    The deal is expected to close in October, said the Calgary-based oil company, which produces 7 million tons of crude oil annually.

    CNPC is considering a proposal in which PetroKazakhstan shareholders could get discounted shares in a spin-off of its newly formed venture with Hong Kong-listed PetroChina, Newco, PetroKazakhstan said.

    The deal, China's largest ever overseas acquisition, follows three weeks after US political opposition scuttled an US$18.5 billion cash bid for Unocal by the Beijing-based China National Offshore Oil Corp Limited (CNOOC). It marks a victory for China in its rivalry with India, another of the world's most populous and energy-hungry nations, for overseas oil and gas reserves.

    Industry analysts attributed the winning of CNPC's bid for PetroKazakhstan to China's solid relationship with Kazakhstan, in contrast to mounting concerns in the US that China's growing economy and energy demand may threaten its national security.

    "We have been involved in talks with PetroKazakhstan about the purchase for a long time, and gradually worked out the successful bid, not like CNOOC's sudden intrusion into the highly-China-sensitive US energy market," said Han Xuegong, a veteran senior analyst with CNPC, who once trained those in the senior ranks of Kazakhstan's oil companies.

    "Kazakhstan will also benefit from its partnership with CNPC, through improvements in oil and gas exploitation technology and supply to the local market," Han added.

    CNPC started its overseas expansion activities more than 10 years ago, and Kazakhstan is the oil giant's second overseas market following Sudan.

    China and Kazakhstan are developing a 3,000-kilometre pipeline costing US$3 billion to pump crude oil to China across the Central Asian state, with the first-phase of the project to be completed by the end of this year.

    Land-locked Kazakhstan, which plans to triple oil output by 2015, is seeking new ways to transport oil to international markets.

    CNPC produced 15.63 million tons of crude oil and 1.9 billion cubic metres of natural gas from its overseas fields in the first half of this year, according to a CNPC official who refused to be identified.

    The parent company made a net profit of US$220 million in the six-month period from its overseas projects, selling US$1.47 billion worth of oil and gas products.

(Source: China Daily)