China oil deals flow where politics less involved

By Joseph Chaney and Sui-Lee Wee - Analysis

HONG KONG (Reuters) - Sinopec's $7.2 billion bid for oil explorer Addax Petroleum (AXC.TO) is a sign that China's energy giants find it easier to secure reserves in parts of the world where there are fewer hang-ups about Beijing owning local natural resources.

Africa and the Middle East, where Swiss-based Addax has its main assets, are more politically disposed to China than are developed nations such as the United States, where local politicians blocked CNOOC's (CEO.N) $18.5 billion bid for oil company Unocal in 2005, analysts say.

Earlier this month, Anglo-Australian miner Rio Tinto (RIO.AX)(RIO.L) rejected a $19.5 billion tie-up with China's state-owned Chinalco -- a deal that had triggered political and shareholder opposition.

"At the end of the day, they may wonder whether it's a waste of time going after targets in the developed world," said Macquarie analyst David Johnson.

"The chances of success are higher in Africa, South America and Kazakhstan than other parts of the world."

Until now, political sensitivities in the West have limited China's outbound investments in resources largely to deals executed on the back of loan-for-oil tie-ups.

In the past half-year, China has lent more than $45 billion to Russia, Brazil, Venezuela and Kazakhstan in exchange for long-term crude supplies.

State-owned Sinopec Group, Asia's top oil refiner, knocked out rival Korea National Oil Co with an offer that is more than four times Addax's stock price in November, and which is China's biggest overseas takeover.

Addax (AXC.L), based in Switzerland but operating in Africa and the Middle East, has been on the radar of Asia's acquisitive energy firms since February, when CNOOC (0883.HK) and India's Oil & Natural Gas Corp (ONGC.BO) were also touted as potential suitors.

The Addax deal will give Sinopec a strong foothold in oil-rich West Africa and Iraqi Kurdistan and a steady supply of oil for its refining operations.

"The listed company is in desperate need of upstream oil assets to feed its downstream business," said Gordon Kwan, Hong Kong-based head of energy research at Mirae Asset Financial, referring to listed Sinopec Corp (0368.HK)(600028.SS)(SNP.N).

"Without that, it would be at the mercy of China's fuel pricing policy."

BIG SHAREHOLDER EYES EXIT

Sinopec's bid was also helped by the fact that Addax's CEO, Swiss citizen Jean Claude Gandur -- one of Europe's richest men -- is also its major shareholder with about 38 percent of the company, and was eager to cash out.

"It's not that often you have a major shareholder like this -- that's the main reason why this one became available," said a Hong Kong-based investment banker who has advised Chinese energy giants on outbound deals, but was not authorized to speak publicly about the matter.