/REUTERS, Astana, October 12, 05/ - Kazakhstan's upper house backed a proposed law on Wednesday that could enable the oil-rich state to interfere in Chinese CNPC's $4.18 billion bid for the Canadian-owned PetroKazakhstan and other similar deals.

The bill would allow Kazakhstan to intervene whenever foreign firms seek to sell their interests in Kazakh oil companies. It would also limit property rights for "strategic resources" like oil and gas assets in the ex-Soviet republic.

Wednesday's approval by the upper house, the Senate, follows a unanimous vote by the lower house last week. It now needs President Nursultan Nazarbayev's signature to become law.

Asked if the bill might have an impact on China National Petroleum Corp.'s bid for Canada's PetroKazakhstan, an official from the Energy and Mineral Resources Ministry said: "Definitely, if we get the president to sign it fast and it is published."

PetroKazakhstan shareholders are due to decide on CNPC's takeover bid on October 18.

A spokesman for CNPC said he had no comment.

Deputy Energy and Mineral Resources Minister Bakhtykozha Izmukhambetov told senators before the vote the new law aimed to "prevent threats to the economic security of the state."

"These new restrictions do not mean a worsening of the republic's investment climate," he said, repeating earlier official pledges that foreign- held oil stakes would be bought out at the market price.

Kazakhstan, the world's ninth largest country, has doubled oil production to 1.2 million barrels per day since the Soviet Union collapsed, putting it in the world's top 20 oil producers.

UNCERTAINTY

Senior CNPC officials have said previously that strong Sino-Kazakh ties are likely to ensure that the Chinese state oil firm wins in its bid for PetroKazakhstan.

But the Kazakh government has avoided making a clear-cut statement about the CNPC bid, although it has said it wants "strategic control" over assets.

Some observers see that as a reference to control of the Shymkent oil refinery owned by PetroKazakhstan, one of only three refineries in the vast ex-Soviet state, which many lawmakers would like returned to state control.

Further adding to confusion over the government's position, the official Kazakhstanskaya Pravda daily on Wednesday quoted unnamed sources close to government as saying the government had approved CNPC's bid for PetroKazakhstan.

"This deal will happen because it is advantageous not only for PetroKazakhstan and CNPC but for Kazakhstan as well," the paper said, adding that "state interests have been fully taken into account".

PetroKazakhstan also faces strong opposition by Russian oil major LUKOIL which is planning to fight CNPC's takeover bid in court as part of its attempts to gain full ownership of a joint venture with PetroKaz.

PetroKazakhstan said on Tuesday LUKOIL would ask a Canadian court next week to block the takeover by CNPC on the grounds that LUKOIL should be allowed to acquire PetroKazakhstan's stake in the joint venture, called Turgai Petroleum.

PetroKazakhstan, which has been involved in legal wrangles with LUKOIL over Turgai since last year, said the Russian company's position was without merit.

[2005-10-12]