HONG KONG - One of China's state-owned oil companies may still be smarting from its failure to acquire Unocal this summer. But another Chinese oil giant showed yesterday that this country is still snapping up assets to satisfy its hunger for energy.
China's biggest state-owned oil company, China National Petroleum Corp., said it would pay $4.18 billion for a Canadian oil company with shares traded in New York and substantial reserves in Kazakhstan.
It is China's largest foreign acquisition yet, and more than twice what a Chinese computer company paid for International Business Machines Corp.'s personal computer business.
China National Petroleum outbid India's state-owned Oil and Natural Gas Corp. Ltd. in reaching a deal to acquire PetroKazakhstan Inc. It is not clear whether the Indian company will make a higher offer.
The process underscores the growing competition for oil resources by the world's two most populous countries, each of which is rapidly increasing oil imports.
The transaction shows that the Great Game, once a competition between imperial Russia and Britain for influence in Central Asia, lives on with new players, as Beijing increasingly challenges Russian and U.S. oil companies for access to the region's energy riches.
PetroKazakhstan's fields are in north-central Kazakhstan, an area where Russian businesses, especially Lukoil, have been active. American companies have been more interested in oil reserves of the Caspian Sea, along Kazakhstan's western border, where the region's giant deposits are located, and have invested more than $8 billion there.
China National Petroleum's willingness to pay a steep price of nearly $8 for each barrel of estimated oil reserves in the ground, with considerable further costs to pump and ship the oil, contrasts with prices as low as $1 a barrel of reserves in Central Asia in the 1990s.
American oil companies have voiced growing alarm that they may be unable to compete with deep-pocketed state-owned oil companies worried about national security. These state oil companies appear more willing to pay high prices for reserves for fear today's high oil prices will endure.
PetroKazakhstan's acceptance of the Chinese bid is a consolation prize for China's oil industry. Another state-controlled Chinese company, CNOOC Ltd., withdrew its $18.5 billion offer for Unocal on Aug. 2 after strong opposition in Congress.
A new Kazakhstan law was the basis for many questions from analysts during a PetroKazakhstan conference call yesterday with investors, analysts and journalists.
The law gives the government the right pre-empt the sale of any oil property in the country, which means the deal cannot be fully accomplished without government approval. But Bernard F. Isautier, the company's chief executive officer, said Kazakhstan could pre-empt the sale of assets within the country but could not block the sale of PetroKazakhstan itself.
"We are not speaking about a sale of assets where pre-emptive rights would apply," he said. "We don't expect any problem in that regard."
In Astana, the capital of Kazakhstan, Mikhail Dorofeyev, head of the media department of KazMunaiGaz, the state oil company and industry regulator, said in a telephone interview that the company would have no comment on the announcement.
In contrast with China's bid to acquire a medium-sized mature field in an area where the oil is cheap to extract, American companies have chosen much bigger deposits in the Caspian region, several hundred miles to the west, where the oil is exceptionally deep, high-pressured and difficult to reach.
Chevron Corp. and Exxon Mobil Corp. own most of the giant Tengiz field, which is still far from its peak potential. Exxon Mobil and Conoco Philips have slices of the world's most costly oil field development project, the $30 billion offshore Kashagan operation that is expected to yield 1 million barrels a day in a decade and help propel Kazakhstan to the ranks of the top five petroleum exporters.
PetroKazakhstan, based in Calgary, Canada, but managed from Windsor, England, is also a considerably smaller company than Unocal, and without Unocal's extensive natural gas reserves or reputation for high technology.
PetroKazakhstan's oil will help fill a pipeline to China now under construction between Kazakhstan and western China.
The pipeline was originally planned to carry oil from other Chinese-owned oil fields in Kazakhstan, but it will have plenty of extra capacity to carry oil from PetroKazakhstan as well, said Vincent Noual, a specialist in Central Asian oil in the Geneva offices of IHS Energy, a big consulting firm.
PetroKazakhstan commanded a steep price of $55 a share in Monday's deal, a premium of 21.1 percent to the stock's closing price on the New York Stock Exchange on Friday.
In the oil industry, "China has consistently been willing to overpay for assets - it's more of a security issue for them than the absolute price," said John T. Kuzmik, a partner and China specialist at Baker Botts LLP, a big Houston energy law firm. India's Oil and Natural Gas reportedly bid $3.6 billion.
China National agreed to pay $54 in cash for each share and put $76 million, worth another $1 a share, into a new company that is to be spun off to PetroKazakhstan shareholders and led by Isautier.
The deal is subject to approval by two-thirds of PetroKazakhstan's shareholders at a meeting to be held sometime in October. PetroKazakhstan agreed to pay a breakup fee of $125 million to China National if it later accepts a higher offer.