UPDATE 3-PetroChina official denies China Gas bid

* Official says no near-term plan to acquire listed gas firm

* China Gas says has not received PetroChina bid

* Analyst says PetroChina to focus deals on oil

(Adds detail, analyst quote, recasts)

By Farah Master and Alison Lui

HONG KONG, April 8 (Reuters) – PetroChina Co Ltd ,
the world’s second-biggest oil and gas producer by market value,
is not considering a bid for natural gas distributor China Gas
Holdings Ltd , a company official said on Friday,
denying an earlier media report.

“PetroChina has no plan to acquire a listed gas company in
the foreseeable future,” PetroChina spokesman Mao Zefeng said by
telephone after dealReporter, a unit of the Financial Times,
said the oil major was working with Bank of America Merrill
Lynch on the acquisition, citing unidentified sources.

Hong Kong-listed shares of China Gas had jumped more than 8
percent on Friday after the earlier report.

“The board also noted that there is a press article in
Financial Times today reporting that PetroChina … is
considering a bid for the company. The board wishes to clarify
that, to its best knowledge, information and belief, the company
has not received any bid from PetroChina,” China Gas said in a
statement to the Hong Kong stock exchange.

Shares in China Gas had fallen sharply since late last year,
when China Gas said Managing and Executive Director Liu Ming Hui
and Executive President Huang Yong were detained by police in
the southern Chinese city of Shenzhen for suspected
“embezzlement of the assets of an organisation in which they
have duties”. [ID:nTOE703064]

PetroChina’s denial of the China Gas bid
made sense as its strategy was to expand its crude oil producing
assets, said Mirae Asset Securities head of energy research
Gordon Kwan in Hong Kong.

“Half of PetroChina’s reserves are in natural gas. What they
don’t have is oil, so look for PetroChina to do more deals on
Canadian oil sands, more deals in Turkmenistan, Kazakhstan and
perhaps even Russia,” said Kwan.

Shares in the country’s dominant crude oil producer were
barely changed in Hong Kong. They have surged about 13 percent
in the past three weeks on continued gains in international
crude oil prices.

POSSIBLE TAKEOVER TARGET

Speculation that China Gas is a potential M&A target has
driven shares of the debt-laden company up about 34 percent in
the past three weeks.

The company raised about $400 million via a share placement
in October to reduce debt, and has been granted a $200 million
credit facility by the Asian Development Bank for development of
new projects.

The company has about 114 gas projects in China.

PetroChina was rumoured to be using its natural gas unit
Kunlun Energy Co Ltd to acquire China Gas, the earlier
report noted.

Analysts are bullish on China’s gas sector, citing
increasing industry production volumes and a supportive
regulatory policy, but Bertrand Law at Bank of China
International, Hong Kong, said China Gas’s high valuation was a
deterrent to any company looking to make a bid in the near term.

“We actually think China Gas’s valuation is still pretty
high. First of all we don’t think it will happen in the near
term and also, we have spoken to Kunlun Energy and China Gas and
they haven’t really heard of anything,” he said.

Law added that shareholders SK Group of South Korea, which
has a 9.7 percent stake in China Gas, and state-owned Sinopec
Group, were the only other companies that he had heard might
look at acquiring China Gas. Law has a “hold” rating on the
company.

(Editing by Muralikumar Anantharaman and Chris Lewis)

UPDATE 3-PetroChina official denies China Gas bid