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Financial Times: China and India put rivalry aside in Syria bid: “State-owned CNPC and ONGC are believed to be working on a joint offer to buy Petro-Canada's 38 per cent stake in Al Furat Production Company, Syria's largest oil producer, which is operated and majority-owned by Royal Dutch Shell.”: Tuesday 29 November 2005

 

By Enid Tsui and Francesco Guerrera in Hong Kong

Published: November 29 2005

 

China National Petroleum Corporation (CNPC) and India's Oil and Natural Gas Corporation (ONGC) have teamed up to bid for assets worth up to US$1bn in Syria - the first time the two countries have co-operated on an oil and gas takeover.

 

State-owned CNPC and ONGC are believed to be working on a joint offer to buy Petro-Canada's 38 per cent stake in Al Furat Production Company, Syria's largest oil producer, which is operated and majority-owned by Royal Dutch Shell.

 

The deal is not expected to deliver a significant boost to the companies' reserves, but it marks an important change from the traditional rivalry between China and India over natural resources.

 

CNPC and ONGC's interest in Syria also underlines the growing attraction of power resources in developing countries outside the US's sphere of influence.

 

Chinese energy groups have intensified their search for assets in those countries after this year's US$18bnbid by China's CNOOC for Unocal of the US failed.

 

People close to the situation said CNPC and ONGC had appointed investment bankers to work on the bid but said other oil companies could mount rival bids.

 

Petro-Canada said in September that it wanted to sell its stake in the Al Furat venture, which it bought as part of its C$3.2bn (US$2.7bn) takeover of the international oil and gas operations of Germany's Veba Oil in 2002.

 

As well as reducing its political risk profile, analysts said the Al Furat fields' dwindling production - which fell from an estimated 390,000 barrels a day in 1995 to about 177,000 b/d this year - might have prompted the Canadian company to sell.

 

Al Furat produced just 10.6m tonnes of oil last year based on market estimate, compared with CNPC's 141.9m tonnes.

 

Analysts said the alliance between CNPC and ONGC is likely to be driven by efforts to rebuild relations between the flagship oil companies of Asia's fastest growing economies, after CNPC beat ONGC with a US$4.2bn bid for PetroKazakhstan in October.

 

Analysts said it was too early to tell whether the Syrian bid marked a long-term alliance between two major buyers of energy resources.

 

"Given the Syrian fields may not be too desirable, and the political risk associated with a country such as Syria, CNPC and ONGC may be working together for the practical reason of sharing the risk and keeping the cost of acquisition down," said Grace Liu, analyst at Guotai Junan Securities.

 

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