COSL Finds Gusher In Norwegian Driller

After a series of failed bid attempts for oil firms in Russia and the United States, China's biggest offshore oil services firm has turned to northern Europe for its first successful foreign acquisition.

China National Offhsore Oil Corp.'s drilling and equipment arm, China Oilfield Services, will buy Norway-based offshore driller Awilco Offshore for $2.5 billion, the two companies announced Monday. At a time when soaring oil prices have boosted the offshore services industry, the two firms will combine to create the world’s eighth-largest rig fleet, with 34 operated rigs, including six drilling rigs in Libya, Saudi Arabia, Vietnam and Western Australia.

The agreement represented an 18.7% premium over Friday's closing price for Awilco shares, which gave the firm a market capitalization of $2.1 billion.

China’s attempts to buy up large oil companies abroad have thus far met staunch political opposition from governments. At the year's start, China Oilfield Services said that the Russian government had blocked, in its final stage, the firm's plan to buy oil services firm STU from TNK-BP for $10 million. In 2005, CNOOC was forced to withdraw its $18.5 billion cash bid for California-based oil and gas firm Unocal because of the political backlash in the United States.

Shanghai-based analyst Mingxia Li of CSC Securities said that China may resort to targeting countries that are politically "less sensitive" to foreign, particularly Chinese, acquisition, and take any opportunities that arise. "The opportunities are a bit hard to come by--where both the price is good and the barriers are low."

Beijing-based analyst Gang Wang, who tracks oil for Great Wall Securities, said that governments, particularly in developed countries, have often viewed aggressive Chinese bid attempts with apprehension. In policy debates, retaining control of domestic oil firms is often seen as a national security issue.

Chinese oil firms need to make such acquisitions to ensure a long-term energy supply to fuel the country’s development, Wang said. "There is some risk in just buying [oil]. If certain conditions in the world deteriorate, people may not want to sell to you," he added, citing Latin America and Africa as possible areas of interest for China.

China Oilfield Services has also said it is eyeing Russia, the Middle East and the Gulf of Mexico for potential strategic purchases.

Hong Kong-listed China Oilfield Services shares were suspended from trading Monday. In Oslo early Monday afternoon, shares of Awilco had jumped 14.9%, to 82.30 Norwegian kroner ($16.13).

(Forbes)