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.
The country's largest oil producer Oil and Natural Gas Corp, which had quoted a higher price for PetroKazakhstan than China National Petroleum Corp when bids closed on August 15, is planning to make 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 Mittal Group, 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 ONGC). 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 on Monday recommended that its shareholders accept CNPC's $55 a share takeover offer.
The transaction is subject to the approval of 66.67 per cent of the votes cast by PetroKazakhstan shareholders at a meeting of shareholders expected to be held in October 2005.
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.
If ONGC-Mittal combine were to make a counter-offer for PetroKazakhstan, it would pit the world's two fastest-growing consumers of oil against each other for resources both will need in ever-increasing amounts as their economies and population surge.
A few weeks ago, CNPC's sister concern CNOOC was locked in a similar offer-counter-offer battle with an American firm for acquisition of Unocal. CNOOC later withdrew.
PetroKazakhstan accounts for about 12 per cent of oil production in Kazakhstan and is the third largest oil producer in that country. It owns 500 million barrels of reserves, 150,000 barrels a day of crude output and a refinery in Kazakhstan.
State-owned KzaMunaiGas is the largest oil producer in Kazakhstan, followed by Chevron.
Calgary-based PetroKazakhstan's board recommended that its shareholders accept the Chinese oil company's offer. The transaction is expected to close in October, the company statement said.
PetroKazakhstan was the first company for which India's flagship ONGC had bid for jointly with the world's largest steel producer Mittal Group.
ONGC had teamed up with the Mittal group to leverage the steel maker's dominant position in former Soviet Union republics. Out of the 14 countries Mittal Group has business interest in, 6 to 7 have oil and gas opportunities.
In Kazakhstan, where Mittal Group has huge business interest and considerable influence on the government, OVL has been eyeing a stake in Kurmangazy oilfield besides interest in Makhambet and Satpayev exploration blocks.
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