HONG KONG Citic, the Chinese government investment company, will pay $1.9 billion to buy the oil assets in Kazakhstan held by Nations Energy of Canada, adding reserves to meet surging demand in China, the world's fastest-growing major economy, the companies said Thursday.

Citic is buying assets that produce 50,000 barrels of oil a day and hold more than 340 million barrels of oil equivalent, Nations Energy said. Citic may build a refinery in Kazakhstan, Citic's assistant president, Zhang Jijing said.

The acquisition is a victory in China's chase for oil with India after China National Petroleum's $4.2 billion purchase of PetroKazakhstan last year. China, the world's second- largest energy user after the United States, has financed construction of pipelines in Kazakhstan to gain access to reserves that are twice as big as those of the North Sea.

The field, being "close to the Chinese market, allows you to take advantage of existing pipeline infrastructure and the potential to bring the oil to market," said Gavin Thompson, country manager for China at Wood MacKenzie, an energy consultant.

Shares of Citic Resources Holdings, a unit of Citic, rose 19 cents Thursday, or 13.2 percent, to 1.62 Hong Kong dollars, or 20.8 U.S. cents.

Chinese oil companies are scouring for oil assets in countries including Angola, Venezuela, Kenya and Indonesia.

President Hu Jintao of China visited his Kazakh counterpart, Nursultan Nazarbayev, in July 2005 to discuss construction of pipelines to transport oil and natural gas to China.

India is trailing China in the quest for oil to feed its economy. The countries were planning a joint bid for Nations Energy's assets in Kazakhstan, people with knowledge of the proposal said in June.

Oil & Natural Gas, of India, lost PetroKazakhstan to China National, which bid more last year.

A spokesman for Oil & Natural Gas, D.K. Dash, declined to comment on the bid for Nations Energy's Kazakh assets, when contacted by telephone.

Eni of Italy, Lukoil of Russia and Chevron of the United States are leading separate groups seeking to invest in Kazakhstan oil.

"The proposed acquisition is an important element in the execution of Citic's oil and gas strategy," Zhang said in the statement announcing the deal. Citic is planning a midsize oil refinery in the Mangistau Oblast region and will seek strategic Kazakh partners for further expansion, Zhang said.

Completion of the transaction is planned for December, Nations Energy said, adding that the Kazakh government has yet to decide whether to waive its pre-emptive rights on the assets. Citic would be entitled to a fee of $50 million if the accord is terminated, Nations Energy said.

Citic has total assets of more than $100 billion and runs businesses including financial services, manufacturing and international trade.

 

By Ying Lou Bloomberg News

Published: October 26, 2006