Team India may lose Petrokaz battle

Stake in the company no longer attractive for India.

The Kazakh government is unlikely to agree to grant Indian companies a stake in Petrokazakhstan, even after it manages to get some control in the Canadian company. Besides, a stake in the company is no longer attractive for India.

Officials told Business Standard, the Kazakh government had conveyed to India that the sale of Canadian company was "grossly overpriced". The company was also embroiled in legal battles both within and outside the Central Asian country.

Kazakhsthan had recently passed a law on subsoil assets in the country permitting the government to intervene and block sales of assets directly or through intervention in the secondary market.

"The government is hoping that ONGC Mittal Energy get some stake in Petrokazakh if the Kazakh government gets an equity in the company. It is unlikely that it will be offered to India since they will want to have a control on a company which produced about 12 per cent of Kazakhstan's daily oil output last year," said an official, adding that China being a neighbour is a closer market for Kazakhstan than India.

Shareholders of Petrokazakh approved $4.18-billion takeover bid from China National Petroleum Corporation, China's largest oil company, late on Tuesday.

CNPC has agreed to sell a 33 per cent stake in Petrokazakhstan to Kazakhstan's state-owned oil company KazMunaiGaz for about $1.4 billion. CNPC will split ownership of an oil refinery equally with the Kazakh company and agree to process a certain amount of crude through its facility Shymkent.

Petroleum Minister Mani Shankar Aiyar had alleged 'foul play' by consultants Goldman Sachs, since CNPC was allowed to revise its bid after ONGC-Mittal combine had bid $3.98 billion.

Aiyar alleged that the ONGC-Mittal bid was the highest when the bids for Kazakhstan's third largest oil producer closed on August 19, but CNPC was allowed to revise its bid to $4.18 billion. Petroleum ministry officials said India was looking at a long-term relationship with Kazakhsthan and would like to keep the issue behind.

The sale to CNPC would need to clear another legal hurdle posed by suit filed by Lukoil Overseas Kumkol BV of Russia in Canada. A Canadian judge reserved a decision until October 26 after listening to four hours of arguments from lawyers.