Kazakh not to support ONGC's PetroKaz rebid

The Kazakhstan government will not support a rebid by India's Oil and Natural Gas Corp (ONGC) for acquiring PetroKazakhstan.

The board of directors of PetroKazakhstan has already accepted the $.18 billion offer made by China National Petroleum Corp Interenational (CNPCI).

Kazakhstan minister of energy and natural resources, Vladimir Shkonik, said

Kazakhstan government will not stop CNPC International (an affiiate of CNPC) from taking over PetroKazakhstan for the benefit of ONGC. Though Kazakhstan does not have a pre-emption right, its approval is required for completing the deal.

"For us, both Chinese and Indian companies are equal. We cannot discriminate against one or favour another. It is a fact that the Chinese company bid higher than ONGC in a tender process that took place in London. The Kazakh government feels the process was fair and does not see why it should be stopped in favour of one party," the official said.

ONGC's international arm, ONGC Videsh Ltd tied up with an investment vehicle controlled by steel magnate, Lakshmi Mittal, to make a bid of $3.98 billion for Kazakhstan's third largest oil producer.

It claims that its bid was higher than CNPCI's initial bid and the Chinese firm was "unfairly" allowed to revise its bid. ONGC was not given a similar opportunity.

The Kazakh official said, if the Kazakhstan government was to stop the sale of PetroKazakhstan it would be in favour of local companies.

"Two years ago, we filed a legislation to stop British Gas (BG) from selling its stake in Kashagan oilfield to outsiders. The legislation ensured that BG stake remained within."

ONGC should accept that it has lost PetroKazakhstan and should look at other opportunities available in Kazakhstan. Meanwhile, ONGC is waiting for PetroKazakhstan to make a filing on the CNPCI's takeover offer in the Canadian court to decide if it should make a counter-bid.

"PetroKazakhstan has made a filing in the stock exchange and will now do so in a local court. The filing would spell out details of the deal, based on which ONGC would decide if it was prudent for it to make a re-bid," said an industry source.

PetroKazakhstan would have to pay CNPCI $125 million in penalty if it were to cancel the present takeover offer. ONGC would have to factor in this amount before making a revised bid. Besides, CNPCI has an option to match any revised offer from ONGC.

CNPCI's offer values PetroKazakhstan at $10.59 per barrel of proven oil and gas reserves, a record for the Caspian region. Taking into consideration the estimated $462 million that the company may potentially have to pay to settle legal claims against

PetroKazakhstan, the deal values the company at $11.77 per barrel of proven oil reserves.

Any offer above $50 per share would be justified commerically if international oil prices remain above $40 per barrel in the long run, the source said. CNPCI has offered $55 per share to take over PetroKazakhstan.

The source said, ONGC can make a revised bid before PetroKazakhstan puts the CNPCI offer to vote at an emergency general meeting of shareholders in the beginning of October.