India irked by China's gloating on PK deal
BEIJING - Chinese petroleum giant CNPC's winning of a bid over India's ONGC to acquire PetroKazakhstan Inc was termed as a "victory" by the Chinese state media August 23, while Indian analysts said the "avoidable" competition for oil resources between the Asian giants would cost the country dearly.
"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," the state-run China Daily said in a front-paged report. However, analysts pointed out that it was the Chinese government and the Chinese people who will have to shell out US$580 million more for acquiring PetroKazakhstan, the Central Asian nation's third largest oil producer, after CNPC was allowed to re-bid, increasing the price by that amount.
"This [competition] could have been avoided if the Chinese side had discussed this issue with us," an official Indian source pointed out, referring to the first-ever India-China dialogue on hydrocarbons held in Beijing on August 9. Additional Secretary for International Cooperation in the Ministry of Petroleum and Natural Gas, Talmiz Ahmad, had led a high-level Indian delegation for the India-China dialogue on hydrocarbons. One of the aims of the India-China dialogue was to avoid competition between the two fastest-growing countries in their global race to acquire oil and gas interests in third countries, which is detrimental to the interests of both countries, he noted.
India's counter-offer obstacles
India's plans to make a counter-offer for PetroKazakhstan might be riddled with impediments, as the Central Asian oil firm would have to shell out $125 million in penalty if it rejects the $4.18 billion offer by China's CNPC. India's OME consortium, which had quoted a higher price for PetroKazakhstan than China National Petroleum Corp when bids closed on August 15, is mulling making a counter-offer in the wake of the Chinese firm being allowed to revise its bid to $4.18 billion, industry sources said. ONGC, which had bid for Kazakhstan's third largest oil producer jointly with the world's largest steel maker, MittalGroup, in the form of the OME consortium, was not given an opportunity to better its $3.9-4 billion bid.
Also, CNPC's deal with PetroKazakhstan, owned by a Canadian company, prohibits it from soliciting new offers (like a revised bid from OME). But it would also have to consider any competing bid and recommend it to shareholders if deemed better for them, sources said. PetroKazakhstan's board of directors had Tuesday recommended that its shareholders accept CNPC's $55 a share takeover offer.
The transaction is subject to the approval of 66.67% of the votes cast by PetroKazakhstan shareholders at a meeting of shareholders expected to be held in October. Should PetroKazakhstan decide to accept and recommend other takeover proposals, it would have to pay a termination fee of $125 million. CNPC will also have the right to match any superior proposals, sources said.