David, Following up to this earlier Watch & Brief Message 21611024 where Stratfor decided to hang its hat on its political hook.
Now, a come down, sort of, not really, actually just a grudging one at most, to, in effect, say "golly we were right, but just a bit off, even so, mostly right, just didn't work out as we wished, no biggie, onward to next item ... golly gee"
The fact of the matter simply is that Stratfor cannot see the changing political tides until and unless then they surge past its nose, and rushes down its windpipe, well after it watches Fox TV report.
I suppose I could alert Stratfor on more changes on the way, but why spoil the entertainment, and also mention that they got the relationship wrong re CNPC and PetroChina ... but why quibble :0)
As to Stratfor's take on the 21% premium, perhaps it has something to do with the pipeline routing, but maybe it also has also another thiung to do with differing perception on where energy price will go, as in 'option value'?
Recommendation, buy the dips on energy.
stratfor.com
Kazakhstan: China's Oil Bid and the Balance of Influence
Aug 22, 2005
Summary
A major Chinese state oil firm launched a takeover bid for PetroKazakhstan on Aug. 22. The offer is more than a simple Chinese resource acquisition and reflects the changing political tides in Central Asia.
Analysis
On Aug. 22, CNPC International -- a subsidiary of Chinese state firm PetroChina -- offered $4.18 billion to purchase PetroKazakhstan, one of the largest oil producers working in the Central Asian state. PetroKazakhstan's board immediately recommended that its shareholders approve the buyout offer. In the world of Central Asian politics, such a bold offer typically means that the Kazakh government has already signed on. Barring an unlikely decision by the Kazakh government to block the buyout, the Chinese are about to get their hands on a shiny new asset. Far from being a simple economic exchange, the deal symbolizes China's growing influence in its western neighbor -- and Astana's apparent willingness to hand geographically strategic assets over to the behemoth on its border.
PetroKazakhstan's primary assets are located in the Kumkol oil fields of central Kazakhstan. Compared to Kazakhstan's other massive fields, Kumkol is a small fry. Singular major projects in western Kazakhstan have six billion barrels or more in reserves, while all of PetroKazakhstan's Kumkol reserves -- comprising more than 20 small fields -- hold proven reserves of only 340 million barrels.
Thus, nearly all the heavy work has been done in Kazakhstan's northwest. That's where Chevron and Exxon are slaving away at the Tengiz superfield, and where a consortium of the world's largest oil firms are trying to figure out how to tap riches buried deep under the Caspian Sea.
For energy-starved China, however, those fields are on the wrong side of the country. After several years of attempting to square the circle by helping export Kazakh crude west to the Black Sea with the intent of shipping it around Africa and Asia to China's southern coast, China bit the bullet in early 2004 and began constructing a multi-billion-dollar, multi-thousand-kilometer pipeline to connect those western Kazakh fields with eastern China.
Enter PetroKazakhstan. The Chinese pipeline route runs smack through the middle of PetroKazakhstan's Kumkol project. No wonder CNPC's offer is at a 21 percent premium over the company's total stock value.
Considering Kazakhstan's extremely precarious geopolitical position -- sandwiched as it is between Russia and China, and with the West knocking down its door to get access to its Caspian resources -- such proximity would make Kazakhstan less likely to embrace Chinese involvement with PetroKazakhstan. Kazakh foreign policy is to seek balance among the various players, not to throw its lot in with one or another. In line with that policy, Astana seriously considered Indian suitors for PetroKazakhstan in initial discussions.
But the United States' recent efforts to roll back Russian influence have resonated in Central Asia as well, and the recent Kyrgyz "Tulip Revolution" which deposed an old and corrupt government in Bishkek startled an old and corrupt government in Astana.
Among the three "big" powers reaching into Kazakhstan -- the United States, Russia and China -- China is not only the weakest, but is both firmly aligned against U.S. interests in the region and cares not a whit about what sort of government rules Kazakhstan. Add in a generous buyout bid that could only be offered by a company with bottomless pockets, and it looks to become a deal that Astana cannot refuse. The cost will be stronger Chinese influence over Kazakh affairs, but for a government fearing a foreign-instigated overthrow, that is a small price to pay.
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