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On the same day that PetroChina says that it’s open to ‘closer ties’ with BP, there are calls from within India for the local energy giant to put its name in the hat for a potential takeover. But could an Indian or a Chinese company really step in at BP?

Leslie Hook writes in today’s FT:

Mr Mao [head of investor relations at PetroChina] declined to discuss the prospect of financial assistance. “We have no comment on market rumours,” he said. “But if there was some opportunity to work more closely together, we would welcome that.”

PetroChina is seen as unlikely to make a full bid for BP, mostly because of political obstacles, but could join the British group in joint ventures or purchase assets from BP.

The most likely move would be for PetroChina to buy BP out of its Pan-American Energy stake, worth about $9bn.

Writing in today’s Economic Times of India, however, Swaminathan S Anklesaria Aiyar thinks that there’s an opportunity here for Mukesh Ambani’s Reliance to become a major world player.

Mukesh Ambani suddenly has an opportunity to take over the fourth largest company in the world. Reliance is small compared with the global oil majors…

Mukesh could offer a merger in which two Reliance shares would be exchanged for every BP share, giving BP shareholders a substantial premium over their current market value. This would, however, carry the risk of sinking Reliance if BP itself is driven into bankruptcy by a failure to plug the Macondo well…

Mukesh is not a passive investor. He wants control. So, he could buy a 10% to 15 % stake in BP, which at current prices would cost between $10 billion and $15 billion. This will give Mukesh a Board seat, not total control of BP. But he can increase his stake later and acquire control once the Macondo well is capped, limiting the damages BP will have to pay.

It’s an interesting idea. Could Reliance – with a market cap of around $80bn – really afford such a gamble? Aiyar thinks that raising $15bn to buy a seat on the board would be pretty do-able for a company sitting on a $5bn cash pile. And with BP shares trading at a P/E ratio of just 5.1 (and with a market cap of around $110bn), a strategic stake bought now could well turn out to be a bargain.

For now BP looks more comfortable discussing options with “long-term partners and friends” in Abu Dhabi (and Russia) than it would going on any blind dates.

And for Reliance, there’s another big question: who would sell them a $15bn stake in BP anyway?

Related:

RIL should bid to take over BP – Economic Times

PetroChina open to closer ties with BP – FT