CNPC ‘to enter’ Kazakhstan

China National Petroleum Corp (CNPC), the nation's largest oil and gas producer by output, has planned to pay around $5 billion for an 8.33 percent stake in Kazakhstan's largest oilfield. This deal would represent CNPC's largest overseas acquisition by value, foreign media reported Saturday.

"That deal, if it materializes, would not only improve China's relationship with Kazakhstan, but more importantly ease the current drain of domestic crude reserves, in response to the country's general efforts," Liu Enqiao, a senior energy analyst with Beijing-based Anbound Consulting, told the Global Times on Sunday.

CNPC will buy this equity from Kazakhstan's state oil company KazMunaiGaz National Co, which has maintained holdings in the Kashagan project by exercising an option to buy 8.4 percent stake of that oilfield project from ConocoPhillips, according to Bloomberg, which added "an announcement (by CNPC) may be announced as soon as (this) week."

Established in 2006, the current oil pipeline between Kazakhstan and China produces 400,000 barrels of crude a day, while Kashagan is expected to produce as much as 370,000 barrels of oil a day, according to Bloomberg's data.

CNPC had not confirmed the news to the Global Times by press time.

This is not an isolated case as CNPC has moved to seek overseas crude resources before, including its plan to buy stake in gas fields in Mozambique from Italian oil and gas group Eni SpA at $4.2 billion in March.

Although it is helping to replenish China's energy-starving market, the State-owned oil producer's latest plan to buy energy resources overseas will only add to the company's financial difficulties, Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University, told the Global Times.

To tackle the domestic short supply of crude, CNPC has hastened steps to tap into overseas oilfields over the last year, which has greatly pushed up its operation costs, including political risks in negotiations, construction and management costs, and has accordingly undermined its financial abilities, Lin said.

CNPC's total debt had amounted to 988.15 billion yuan ($160.87 billion) by the end of last year, up 18.3 percent year-on-year, while its net profit had reached 115.3 billion yuan over the same period, down 13.3 percent year-on-year, according to the firm's paper.

CNPC had its market value of 1.39 trillion yuan Friday (the latest trading day), shrinking from 8.25 trillion yuan on the debut of floating its shares on the mainland market on November 5, 2007, then the world's largest listed firm in terms of market value.

Meanwhile CNPC's share price closed at 7.61 yuan Friday, dipping from 43.96 yuan at the end of its debut trading day in November 2007.