PetroKazakhstan convened its shareholders meeting on Wednesday in Calgary, Alberta of Canada, at which shareholders approved the offer by China National Petroleum Corp (CNPC) International Ltd, a wholly-owned subsidiary of CNPC to acquire 100 percent of the assets of PetroKazakhstan for 55.00 US dollars cash per share. A total of 46,896,714 shares attended the voting and 99.04 percent approved the offer. Local experts believe that if the acquisition wins approval from a local court and the Kazakhstan government, the transaction will be China's biggest cross-border deal ever made by a Chinese company.

On August 22, CNPC and the PetroKazakhstan reached the purchase agreement, which came into effect with the approval of two thirds of PetroKazakhstan' shareholders. Before this, three companies of China, Russia and India offered bidding for the acquisition. The Indian company offered a price of 400 million US dollars more than CNPC did for the deal. Finally, CNPC offered a quotation of 4.18 billion USD to defeat its rivals and won the bid. According to the agreement reached, PetroKazakstan will have no right to seek new buyers. However, it reserves the right to accept a higher quotation under the premise of paying CNPC 125 million USD of indemnification while CNPC reserves the right to further raise its quotation for another bidding. So, any buyers will pay at least 4.305 billion USD to win the bidding.

Registered in Canada, PetroKazakhstan Inc is an international petroleum company with all of its assets in the Republic of Kazakhstan, including oil and gas fields and oil refineries. PetroKazakhstan Inc shares are traded on Canadian, the United States, British, German and Kazakhstan exchanges. Its oil and gas fields are located in Kumkol area in Kzyl-Orda, southwestern Kazakhstan and the Shymkent oil refinery in southern Kazakhstan is one of three biggest oil-processing plants in the country. The company is the third largest oil producer in the nation with a daily crude oil output capacity of 150,000 barrels and its oil refinery can process 80,000 barrels of crude oil per day. In 2003, the net income of the company was 316.9 million USD. In 2004, it reached 500.7 million USD. In the first quarter of this year, the company's business income was 503 million USD with its net profits reaching 166 million USD.

Entering into Kazakhstan market in 1997, CNPC has a comparatively smooth cooperation with local energy resources enterprises, obtaining rich experiences. This has created favorable conditions for CNPC to acquire PetroKazakhstan. In the recent two years, the Kazakhstan government and the environmental departments have pressures on the company, demanding it solve the issue of recycling the concomitant gas in oil exploitation so as to avoid waste and environmental pollution caused by natural gas combustion. However, the settlement of the problem needs pipelines for processing and transmitting natural gas at the expenses of a large amount of funds. The contradictions between the two sides have worsened the relations between them. As a result, it has become one of the reasons for the sale of the company. In the meantime, CNPC and Kazakhstan-based Aktobe Munaigas Co have solved the problem. The first pipeline for recycling natural gas concomitant in Kazakhstan, solely financed by the Chinese side, went into official operation on October 5 and the recycling levels have surpassed the standards set by the Kazakhstan government, winning the full affirmation from the government.

Last year, Kazakhstan passed the lawful documents, which give priority to the right to purchasing mineral exploitation to the country. Its parliament added a supplement to the law on October 13 stipulating that the nation not only can have priority to buy the right to exploitation or shares transferred by mineral exploitation enterprises, but also to purchase directly or indirectly the right to exploitation or shares transferred by the enterprises influenced by the mineral-exploiting enterprises, that is to say, any foreign firm can not control the right to local mineral-exploitation completely. According to local media sources, CNPC and Petrokazakhstan signed a "memorandum of mutual understanding'' on October 15. According to the memorandum, after the acquisition, Kazakhstanmunaygaz will have one third of PetroKazakhstan's shares needed for the country's strategic control over the exploitation of mineral resources, which is worthy of 1.4 billion USD. In the meanwhile, Kazakhstan side will obtain the right to joint management of the Chimkent oil refinery and oil products in equivalent conditions.

The share transfer problem on PetroKazakhstan has turned to be a focus of all circles in Kazakhstan. Vladimir Shkolnik, minister of Energy and Mineral Resources of Kazakhstan, said on Tuesday that the Chinese side's acquisition of PetroKazakhstan at the price of 1.5 times of the company's assets value, worth equivalent to 2.9 billion USD market price. The Kazakhstan's government expressed its support for the CNPC's acquisition of PetroKazakhstan in many ways. According to local media quoting well-informed sources, the government's support for CNPC's acquisition is because it not only benefits the two oil companies, but also Kazakhstan. Firstly, located at the middle point of the China-Kazakhstan oil pipeline, the Kumkol oilfields under PetroKazakhstan produce nearly 7 million tons of oil annually, which is very advantageous to the oil-transmitting pipeline scheduled to be complete by the end of this year. Secondly, CNPC's successful settlement concerning the rational use of petroleum concomitant gas is beneficial to solving the issue of resources waste and environmental pollution for PetroKazakhstan. Thirdly, being favorable to eliminating contradictions existed between PetroKazakhstan and the Kazakhstan government in the areas of petroleum exploitation and management, and to turning around the company's economic losses resulting from these. Fourthly, the Kazakhstan government wishes to realize multilateral capital structure in the energy resource area in order to change the situation of western capital concentration in this area. More analyses show that the repeated enhancement between China and Kazakhstan in the area of energy resource cooperation is in line with the long-term strategic interests of the two countries.