China National Offshore Oil Corp., the parent company of Cnooc Ltd., says it is looking at the assets of former Russian oil giant OAO Yukos.
But any deal would need support from the governments of both countries, according to Cnooc's chairman.
Fu Chengyu, chairman and chief executive of Cnooc, said he was "interested" in the $1 billion in non-core overseas assets that Yukos wants to sell to pay off its remaining tax debts, according to the state-run Shanghai Securities News. But any move would require "the decision and coordination of the governments," Fu said, according to the report.
Such a deal could run into formidable opposition from the Russian government, which could block any such sale or try to divert those assets to other Russian companies.
A Cnooc spokesman confirmed Fu's statement but added that there is no deal on the table right now. "The newspaper reported my chairman is interested in assets. Everybody's interested in those assets," the spokesman said.
Cnooc, China's biggest offshore oil producer, catapulted to prominence this year with its failed bid to buy Unocal Corp. in what would have been the biggest Chinese takeover of an American company. Rival Chevron Corp. eventually bought Unocal after a political firestorm in the United States ignited by fears of a company backed by the Chinese government owning American energy interests.
But Cnooc is widely seen as still on the lookout for overseas oil and gas fields. The company is keen to get experience and partners in the challenging and costly arena of deepwater oil drilling, in which it has limited exposure.
Yukos is offering to sell only its refineries and pipelines in Eastern Europe, not its remaining oil fields.
It's unclear how open the Russian government would be to a Chinese purchase. For years, Chinese oil companies have sought to buy Russian oil assets, but they have been thwarted by the Kremlin, which prefers China as a customer, not an investor. Last year, as Yukos began to collapse and its oil exports to China were in doubt, the Russian government made continued deliveries to China a priority.
The Chinese rely on rail to receive oil imports from Russia. Plans to build an oil pipeline from Russia to China have never proceeded, in part because of longstanding political rivalry between the two nations.
China's biggest oil producer, state-owned China National Petroleum Corp., in late October completed the purchase of PetroKazakhstan Inc., a Canada-based company that produces and refines oil in Kazakhstan. That deal was nearly toppled by Russia-based energy giant OAO Lukoil, which was working with PetroKazakhstan in developing a Kazakhstan oil field.