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Home / News / Today's Headlines / CNPC Seeks Bid Partner to Buy Santos Ltd.

09.12.2008

CNPC Seeks Bid Partner to Buy Santos Ltd.

By Joseph Chaney and Mette Fraende, Reuters

Shares in Santos Ltd rose 16 percent on Monday on a newspaper report that China National Petroleum Corp (CNPC) may team up with a foreign firm to bid for Australia's third-largest oil and gas firm.

CNPC, the parent of Asia's top oil and gas producer PetroChina is looking to enlist a partner, according to the South China Morning Post, citing market sources.

At Friday's close, Santos was valued at around $4.6 billion.

The paper said Chevron, BP, Eni and Total were potential bid partners, without giving further details.

Santos has long been seen as a takeover target given its access to natural resources projects across the region. The company is planning a A$7.7 billion liquid natural gas (LNG) project in Australia's Queensland state and has oil and gas assets in Indonesia and Vietnam.

Santos is also a partner in an $11 billion LNG project in Papua New Guinea.

Asia's strong economic growth in recent years has fueled demand for energy-related assets, though that demand has slipped in the current downturn.

Suitors have waited for the South Australia state government to remove a 15 percent shareholder cap on Santos, imposed in 1979 amid concerns over the security of gas supplies. The cap was lifted on November 29.

"I think the timing is perfect given the share price and commodity price meltdown," said Gordon Kwan, head of CLSA's China Energy Research, adding CNPC was well capitalized.

"This is clearly a win-win: Santos can monetize its reserves and CNPC can ensure the long-term energy security of China," Kwan said.

"I would not be surprised if BP is CNPC's partner. BP has significant JVs with oil companies in China, so I think BP and CNPC would make good partners -- this is the time to do it."

A spokesman for Santos said the company did not comment on market speculation.

In July, Santos appointed David Knox, a former BP executive, to lead its next phase of domestic and international expansion, a move analysts said was aimed at fending off potential takeovers.

Reuters reported in September that Britain's BG Group turn its sights on Santos after its hostile $11.1 billion bid for Origin Energy was rejected.

Another potential bidder could be Japan's Mitsubishi Corp, sources have said.

Santos shares rose as much as 15.9 percent and by 4:36 a.m. GMT (11:36 p.m. EST) were trading up 10.3 percent at A$13.40.

 - Copyright 2008, Reuters. All rights reserved.

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