Resources Nationalism - Russia Shuns China Money.

Resource nationalism remains a strong trend in OPEC and other areas such as Russia. Moscow has just rejected a bid by state-owned China Oilfield Services to buy a unit of TNK-BP, smothering what would have been the firm's first acquisition abroad. China Oilfield, the drilling and equipment arm of top Chinese offshore oil producer CNOOC Group, had agreed to buy oil services firm STU from TNK-BP for more than $10m, making its maiden foray into the world's No. 2 oil exporting country. Reuters on Jan. 25 quoted a company official as saying the Russian government had thrown out the deal - which both firms had thought would go ahead with little obstacle - without any explanation.

Despite the failure, the company said it will keep exploring acquisitions in Russia. The official said: "Russia is still one of our strategic markets. We will continue looking for other projects there. But we may change our approach for future acquisitions".

Shares in China Oilfield plunged 12% on Jan. 24, lagging the benchmark Hang Seng Index's 2.3% fall, as investors swallowed the surprising news. China Oilfield now views Russia, the Middle East and the Gulf of Mexico as strategic markets it needs to explore. It already maintains a presence in South-East Asia. But if it eventually wins entry into Russia, it will still lag Western oilfield services giants such as Schlumberger and Halliburton, which have bought into local independents and now control about a third of the Russian service sector. Russian oil majors and independents each hold a third. China Oilfield Chief Executive Yuan Guangyu told Reuters last August that the company was in advanced talks to buy another foreign firm, in a deal that would dwarf the STU transaction. But the official declined to disclose any details. Reuters quoted an analyst as saying: "I don't think they have the scale to buy any listed company. If they do look it's probably going to be private smaller companies".

China's thirst for large IOCs - and for resources to feed its booming economy - was showcased by listed CNOOC's $18.5 bn cash bid for California-based producer Unocal in 2005. CNOOC, a unit of the CNOOC Group, abandoned the offer in the face of strident US political opposition.

Some of Russia's largest fuel exporters are redirecting export volumes to the domestic market in a rush to cash in on high prices at home while recession fears drive a downturn on international oil markets. Prices for light products as well as heavy fuel oil remain relatively high in Russia, while gasoil futures, the benchmark for cash trade in Europe, hit a three-month low last week, and Europe's fuel oil benchmark in recent weeks has traded near its deepest discount to crude oil in about a year.