BP, Shell eye Santos

Global energy giants BP, Eni and Shell are eyeing possible bids for Australia's No.3 oil and gas firm Santos, which one analyst valued at around $7 billion, but a bid from China looks unlikely, dealmakers say. Takeover speculation has swirled around Santos, which has a strong balance sheet and coveted liquid natural gas (LNG) prospects, since Nov 29 when a government cap on foreign ownership expired. Its shares soared 16 percent on Dec. 8 after a media report said China National Petroleum Corp (CNPC), parent of PetroChina, may bid. But with Australia reviewing a raft of Chinese investments, including Chinalco's contentious $19.5 billion deal with miner Rio Tinto, alarm bells are ringing in Canberra that China Inc might end up owning too much of Australia before the global financial crisis ends. That makes a CNPC bid highly unlikely, dealmakers say. "The Chinese realise they cannot succeed with a hostile bid," said a Hong Kong-based investment banker with direct knowledge of the matter. CNPC spokesman Liu Weijiang said he did not have any knowledge of the situation when contacted by Reuters. The banker added that BP, Eni and Shell are looking at Santos, but a formal process is not yet in place. "The hawks are swirling," the banker said. BP and Shell declined to comment when contacted by Reuters. Eni did not respond to calls seeking comment. "All of those companies have business development departments that are fully on top of Santos," a second Hong Kong-based investment banker said. Both bankers declined to be named because of client sensitivities. STRONG LNG PROSPECTS Santos is planning with Petronas a A$7.7 billion ($5.4 billion) LNG project in Australia's Queensland state which has earned it the envy of peers nurturing LNG growth ambitions in the Asia-Pacific region.