Deals and IPOs

After Nexen, CNOOC May Target BP's Stake in TNK

Sri Jegarajah|Reporter, CNBC Asia Pacific

Energy-hungry China may not be done yet on the acquisition trail.

Hard on the heels of state-run CNOOC's $15.1 billion all-cash deal to acquire Canadian oil producer Nexen , speculation is building that the Chinese oil major may make a consortium bid for BP's 50 percent stake in TNK-BP, Russia's third-largest oil company.

State oil firm OAO Rosneft announced on Tuesday that it would enter talks to buy the British oil major's 50 percent stake in TNK-BP, pitting the Kremlin against the four Russian oligarchs who own half of the Anglo-Russian oil firm. BP put the stake up for sale on June 1 after a breakdown in shareholder relations.

"The move that comes to mind would be BP selling its stake in TNK-BP with shareholder backing, to a consortium which would include Russian interests along with China's CNOOC and Sinopec Corp. (China's top refiner)," John Licata, Chief Energy Strategist, Blue Phoenix Inc., an independent energy and metals research company based in New York City.

"As for BP, the company has very strong ties to both CNOOC and Sinopec, so them considering a Chinese offer is not that far-fetched, especially since both parties expressed interest in the TNK JV," Licata said.

Plus, allowing the Chinese to be a part of BP TNK would be received positively in China, Licata added, and that would likely result in much stronger ties between the two countries. Ultimately, however, "it all will come down to economics," Licata admitted.


Energy analysts CNBC contacted wouldn't rule out the possibility of China's oil majors bidding for BP's stake in TNK though many believed the complexities of Sino-Russian relations and associated national interest concerns raised would be formidable barriers to getting any deal done.

"Deals of that size all come down to politics with economics as an afterthought," said Warren Gilman, Chairman and CEO of CEF Holdings in Hong Kong. "I don't believe that the oligarchs (including Mr. Putin) will want China meddling in their domestic pie-carving exercises so I think this idea is a long shot indeed. Canada is very different from Russia at the moment in that President Hu currently has an ally in Prime Minister Harper. Not so with Mr. Putin."

As for actual negotiations between the parties on the ground, Fereidun Fesharaki, Chairman of energy consultancy FACTS Global Energy (FGE), said there he was aware of "approaches but no serious talk that I know of." The main obstacle appears to be TNK's insistence of sovereignty and independence.

"The problem is TNK would like someone to give them money but not interfere, and the Chinese would interfere," Fesharaki said. "If the Chinese side does bid, CNOOC is out in my view after the big bid in Canada. It could be CNPC or Sinopec or even Sinochem."