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Financial Times: Oil Search plays down talk of $5bn approach from China

By Peter Smith in Sydney and Richard McGregor in Beijing
Published: September 18 2007 03:00 | Last updated: September 18 2007 03:00

Oil Search yesterday played down reports that it was the $5bn bid target of a Chinese joint venture after shares of Papua New Guinea’s leading oil and gas producer jumped 19 per cent.

The company said it had not received any “formal” takeover approaches after a report suggested CNPC Exploration, a joint venture between China National Petroleum Corporation and PetroChina, was considering a bid worth close to $5bn.

Any bid would open up a new and potentially controversial front for Chinese companies investing offshore, as they have recently shied away from attempting to take over high-profile publicly traded companies.

Bitterness over the unsuccessful bid by Cnooc, another Chinese state energy enterprise, for Unocal, the US oil and gas company, in 2005 forced a reassessment in Beijing about the hand-ling of foreign takeovers.

PNG and Australia are seen to be more friendly to Chinese investment but this attitude has yet to be tested by a takeover bid for a large asset. Oil Search is listed on ex-changes in both countries.

Hu Jintao, China’s president, spent a week in Australia this month during the Apec forum, a long visit aimed at cementing ties and laying groundwork for long-term resources deals.

Oil Search said it had not had takeover talks with CNPC. In Beijing, CNPC declined to comment.

However, Oil Search added the Chinese company had been in contact with the PNG government and ExxonMobil, the US oil major that is Oil Search’s long-term partner, on potential natural gas sales. “The company continues to discuss potential participation in a range of proposed gas developments in PNG with a number of international companies,” Peter Botten, Oil Search managing director, said in a statement.

Shares in Oil Search jumped by 75 cents, or 19 per cent, to A$4.60 in early trading, valuing the company at close to A$5bn (US$4.2bn). The shares ended the day 11.7 per cent ahead at A$4.30. The shares last month traded as low as A$3.20.

PetroChina has become more active in the southern hemisphere energy sector in recent months. In deals overseen by Mr Hu during his visit to Australia, PetroChina signed two agreements worth up to A$55bn for LNG with Woodside Petroleum and Royal Dutch Shell.

At the end of last year, Oil Search had proven and -probable reserves of closeto 82m barrels of oil equi-valent and gas resourcesof 4,600bn cubic feet.

This year Oil Search and ExxonMobil dropped a $5.5bn plan to build a pipeline between PNG and Australia, to focus on more promising investments tapping into PNG’s gas reserves.

Copyright The Financial Times Limited 2007 and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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