India says Goldman Sachs helped China's CNPC bid for PetroKazakhstan - report

Forbes via AFX ^ | 10.16.2005, 10:08 PM

[Gengis Khan]

India says Goldman Sachs helped China's CNPC bid for PetroKazakhstan - report
10.16.2005, 10:08 PM

BEIJING (AFX) - India has accused Goldman Sachs of presiding over an auction for the PetroKazakhstan oil group marred by a 'lack of propriety and transparency' and where the rules were changed mid-way through to help a state-controlled Chinese oil group, the Financial Times reported, citing an interview with Mani Shankar Aiyar, India's petroleum minister.

'The Indian bid was easily highest and the matter should have been closed,' Aiyar was quoted as saying.

'I'm sick and tired at the lectures we are given by the west about the rules of the market, the sanctity of contracts and the need for correct procedures.'

He added: 'Goldman Sachs moved the goalposts while the bidding process was on, but since PetroKazakhstan is incorporated in Canada, it's for the Canadians to ensure that actions on their soil are completely legal.'

China National Petroleum Corp (CNPC) won PetroKazakhstan, a Canadian company operating in the Central Asian state, from under the nose of India's state-controlled Oil and Natural Gas Corp (ONGC) and its partner, LN Mittal, despite their initially higher first round bid.

The paper quoted Goldman Sachs as saying: 'We handled a fair and transparent auction.'

Bankers agree ONGC's initial bid, before an Aug 15 deadline, was higher than CNPC's 51 usd per share against 50 usd but say CNPC was granted a period of exclusivity because its deal was 'deliverable', the paper said.

CNPC then raised its offer to 55 usd.

The Wall Street Journal, citing people familiar with the situation, said CNPC signed a binding agreement over the weekend to sell a 33 pct stake in PetroKazakhstan Inc to Kazakhstan's state-owned oil company to secure its bid for PetroKazakhstan.

(1 usd = 8.1 yuan)

bjburo@xinhuafinance.com

amj/tr

 

 

 

Kazakh oil deal unfair, says Aiyar

rediff Business Bureau | October 17, 2005 10:49 IST

In August, when China outbid India to acquire PetroKazakhstan Inc, Kazakhstan's third largest oil producer, after its flagship company CNCP raised its offer higher than the Indian price, question were raised about the transparency of the deal.

China National Petroleum Corp, which trailed the Oil and Natural Gas-Mittal Group combine when price bids were made on August 15, raised its bid to $4.18 billion to acquire PetroKazakhstan, a Canadian oil firm operating in Central Asia.

ONGC-Mittal combine was not given a chance to match or rebid, ONGC sources had pointed out.

In an interview to the Financial Times, Union Petroleum Minister Mani Shankar Aiyar vented his anger at Goldman Sachs for changing the rules midway to help the state-controlled Chinese oil group. Aiyar said the auction was marred by a 'lack of propriety and transparency.'

Goldman Sachs, however, said the deal was 'fair and transparent.'

The Indians were clearly ahead of the Chinese in the first round.

ONGC's initial bid of $51 per share, before an August 15 deadline, was more than CNPC's $50 per share.  The merchant bankers acting on behalf of the seller (PetroKazakhstan) had even sought certain clarification on their bid.

But even before the Indians could submit their clarifications, the sale announcement was made. Goldman Sachs said CNPC was granted a period of exclusivity because its deal was 'deliverable.' CNPC then raised its offer to $55.

PetroKazakhstan made the sale announcement at 0730 hours London time, at least a couple of hours ahead of the scheduled filing by ONGC-Mittal combine at the London office of the merchant banker.

The Indian consortium had told the merchant bankers on August 19 that they were willing to better their bid of close to $4 billion if certain information on PetroKazakhstan's operation was provided.

That never happened.

Aiyar told FT that Goldman Sachs had 'moved the goalposts while the bidding process was on.'

PetroKazakhstan accounts for about 12 per cent of oil production in Kazakhstan. It owns 500 million barrels of reserves, 150,000 barrels a day of crude output and a refinery in Kazakhstan.

State-owned KzaMunaiGas is the largest oil producer in Kazakhstan, followed by Chevron.

Even though, Calgary, Canada-based PetroKazakhstan's board recommended that its shareholders accept the Chinese oil company's offer, Kazakhstan is contesting the right of New York-listed PetroKazakhstan to sell 'sub-soil assets.'

The transaction is expected to close this month.

Aiyar said India and China should cooperate rather than compete as they go about 'securing energy supplies for their fast-growing economies', adding that the future does not lie in 'rivalry.'

In November, Aiyar will lead a delegation to Beijing to discuss the lessons from the PetroKazakhstan debacle, and to sign an agreement governing competition for hydrocarbon reserves between Chinese and Indian companies.Few, however, expect that Chinese companies will actually share their business plans with their Indian rivals.

 

Lesson for India from energy rivalry
By Jo Johnson in New Delhi
Published: October 16 2005 23:49 | Last updated: October 16 2005 23:49

India's failure to win control of PetroKazakhstan, the Canadian oil company with all its operations in the Central Asian state, marked a low point for Mani Shankar Aiyar. It did, however, confirm India's petroleum minister's belief that Asia's two emerging economic giants should co-operate rather than compete as they go about securing energy supplies for their fast-growing economies.

Although India and China enjoy better relations than in the past, many liken their competition for energy and influence in the region to the 19th-century “Great Game” between Britain and Russia. It is a comparison Mr Aiyar loathes. “China is not an imperial power and nor are we,” he says. “The great game led to a war to end all wars and set the stage for round two, in which millions of people died.”

Next month, Mr Aiyar will lead an Indian delegation to Beijing to discuss the lessons of the PetroKazakhstan debacle. China secured control of the New York-listed company after a bidding war with India's Oil and Natural Gas Corporation and its partner, L.N. Mittal. This saw the Canadian company's shares double in value over the summer and both sides disgorging large sums to lawyers and investment bankers.

“I don't think the future lies in rivalry at all,” he says. “I think the PetroKazakhstan instance alone shows that when China and India pit themselves one against the other, it may be China who wins or it may be India who wins, but the guy who goes running to the bank with a huge smile on his face is somebody who's made $600m out of nothing but counter-bidding between the only two possible buyers.”

During his visit, Mr Aiyar aims to sign an agreement governing competition for hydrocarbon reserves between Chinese and Indian companies. Such a deal, he believes, would radically alter the balance of power between the owners of oil and gas assets and the two Asian economies, which have been moving markets against themselves as they battle for energy.

“Essentially it would set up an institutional framework within which companies of the two countries could inform each other in time of where their interests lie and then try to harmonise these positions,” Mr Aiyar says. “The market will, of course, dictate competition on occasion, but the number of occasions on which we can go in shoulder to shoulder might be very considerable.”

Few expect that Chinese companies will share their real business plans with their Indian rivals, and Mr Aiyar's enthusiasm for the scheme betrays an idealism that his critics say is actually counterproductive meddling. The chairman of the ONGC, Subir Raha, recently lashed out at Mr Aiyar for not knowing the difference between a publicly listed company with obligations to its shareholders and a government department.

Mr Aiyar is adamant: “We've been slightly taken aback by the enthusiasm with which the Chinese have welcomed our overtures. We've spoken not only to all the major Chinese companies operating abroad, but also followed it up with discussions with the government. A series of memorandums of understanding have been drafted and I feel fairly confident we'll be able to conclude many of these during my forthcoming visit.”

Despite suffering a sprained ankle over the summer that has left him with an awkward limp, Mr Aiyar has emerged as one of the most vigorous and energetic ministers in the Congress-led government. His intellectual self-confidence, love of rhetorical flourishes and determination to secure Indian access to oil and gas have given the Cambridge graduate a profile enjoyed by no previous Indian petroleum minister.

A close friend of the late prime minister Rajiv Gandhi, and a former diplomat, Mr Aiyar has appeared in recent months to be running a parallel foreign policy, particularly with respect to Iran. Two of his biggest projects both involve Iran a pipeline via Pakistan and a $25bn liquefied natural gas import contract and have suffered from India's decision to support the EU-3 resolution on Tehran's nuclear programme.

On the left wing of the Congress party, Mr Aiyar refuses to divulge what he felt about this decision, which rocked India's ties with the non-aligned movement. “I don't exist personally,” he says. “I am a member of the cabinet, which takes decisions on the basis of collective responsibility.” He insists the $7bn Iran-Pakistan-India pipeline, which is opposed by the US and has been questioned by India's prime minister, is on track.

Where next will Mr Aiyar place India's pawns on the map of world hydrocarbons? He and his officials spent Thursday thrashing out a strategy for a “major thrust into Africa”.

He has just bought some blocks in Cuba and is in talks with Venezuela, as well as with Trinidad and Tobago and Surinam.

“Wherever opportunity knocks and even where opportunity doesn't knock we turn up and see what we can do,” he says.

[Gengis Khan]

http://www.forbes.com/markets/feeds/afx/2005/10/16/afx2279289.html

http://inhome.rediff.com/money/2005/oct/17aiyar.htm

http://news.ft.com/cms/s/2e0c905c-3e96-11da-a2cb-00000e2511c8.html

[endthematrix]

Goldman Sachs is up China's wazzu. Morgan Stanley is not far behind. Wonder if they had a hand in the deal?

[Don W]

Now THIS is a BIG one for our fellow Canucks!

[Arjun]

Nice post.


"I'm sick and tired at the lectures we are given by the west about the rules of the market, the sanctity of contracts and the need for correct procedures"
Amen! Tell that to Goldman sachs next time they want to do something in India.

[Oldexpat]

Based on my business dealings with the Chinese petroleum companies..anything they do is laced with curruption. India is not much better, but I'm sure there is a lot of money changing hands that is not included in the bidding..
I won't invest in any Chinese companies..you can't trust anything they publish or say.

[Gengis Khan]

Where next will Mr Aiyar place India's pawns on the map of world hydrocarbons? He and his officials spent Thursday thrashing out a strategy for a “major thrust into Africa”.

He has just bought some blocks in Cuba and is in talks with Venezuela, as well as with Trinidad and Tobago and Surinam.

“Wherever opportunity knocks and even where opportunity doesn't knock we turn up and see what we can do,” he says.

Yeah thanks to Western companies, now that we(India) are knocked out of Central Asia by China, we look for oil in Iran, Africa, Cuba, Venezuela and Surinam. But wait we already voted against Iran, so Iran is out!

Isnt it just great! Thank you Goldman "Sucks". We will remember your "help"!

[Gengis Khan]

I dont think western companies are any better when it comes to corruption (at least jugding from the article). They (western companies) dont hesitate bending the rules when it suits them but always cry foul whenever they are at the receiving end from Indian or Chinese governments.

Although its only the "third world" governments that always receives bad publicity.

[Arjun]

Iran is not out yet. Iran is one place that does depend on India simply out of geography. UN vote notwithstanding.
Though India will have to match china even in bribery if thats what it takes to win. It just means its a dog eat dog world out there. Though the next time someone accuses India or corruption we can rest assured that the accuser is living in a glass house.

[NHResident]

Hey, Goldman Sachs does what it has to do to build up the size of partner bonuses. You don't get multi-million dollar bonuses by not having satisfied 'customers'. You just have to figure out where the biggest payoff comes from. Business is business. If you don't make a profit and compensate the gang at the top - there is no tomorrow.

Just like any company - you do what you have to do to make sure you take home a profit - the bigger, the better. That's the reason they are there.

[Wiz]

Our country apologize for any American firms doing bussiness with undemocratic country while it also threats interests of our strategic partner (India). This is a great shame for our country and our government should pass laws to prohibit this type of unethical activity to happen again. I ask the people of India to ask our government through USINPAC to pass laws that will prohibit this to happen again.

[Gengis Khan]

You needn't apologise. We all do business with undemocratic countries. And America or any other country cannot be held responsible for the actions of individual companies.

And I don't think India can (or should) prevent any country or company from doing business with whosoever they choose unless and until it directly threatens our security.

[Calpernia]

ping

[Alamo-Girl]

Thanks for the ping!

[Calpernia]

Self reference:

http://www.freerepublic.com/focus/f-news/1313753/posts


2 year missile sting

>>>But the market for Lakhani's Indian-style women's blouses fizzled in the late 1980s. He declared bankruptcy and became a freelance middleman, negotiating deals for commodities ranging from oil to foodstuffs, and constantly shuttling between Europe and the Middle East.

One client was Ashwini Puri, an Indian entrepreneur who Lakhani says he had known for decades. Puri used Lakhani as a ground-level broker to handle the minutia of business negotiations. <<<<

[Calpernia]

>>>>Weeks after the 9/11 attacks, Lakhani said, he traveled to Dubai to look for potential investors for a $250 million oil refinery project in India. While there, Lakhani said, Qayyum encouraged him to speak with a friend named "Haji" who had ties to wealthy Saudis.

Lakhani said he and his potential investor spoke briefly by phone and agreed to talk again. They did so in December and in the same conversation Rehman asked Lakhani about arms, according to a transcript. Soon afterward, Lakhani faxed Rehman weapons brochures.

FBI agents listened as the men met for the first time in New York in January 2002, according to transcripts. Each had a purpose: Lakhani mentioned the oil refinery; Rehman brought up weapons<<<<