China Oilfield Services Ltd (COSL) is in talks to acquire an independent Russian oil services company in an ambitious foray into the vast, under-invested sector, a COSL executive said yesterday.

COSL, a unit of Chinese oil and gas firm CNOOC with a market capitalization of about US$2 billion, plans to get a foothold in Russia's massive oil services sector, the world's largest after the United States and the Chinese mainland.

"We are looking at a company. COSL will follow the lead of Western companies... and buy a Russian company as a first step into the market there," Chen Weidong, Executive Vice-President of COSL told reporters on the sidelines of an industry forum.

Chen said COSL would take a majority stake in the Russian firm, but the financial size of the deal would not be "significant" as this would be COSL's first overseas acquisition. He declined to name the target company or to give a timeline for clinching a deal.

He ruled out Integra and BK Eurasia, two Russian service firms as COSL's acquisition target.

Western service giants such as Schlumberger and Halliburton, which bought into local independents, now control about a third of the Russian service sector. Russian oil majors and independents each hold a third.

Chen said the company would offer a mid-range service, a niche against the high-end western technology and low-end Russian services.

The service would be focused on onshore drilling, Chen said, adding that the mainland's 1,000 drilling rigs ranked as the world's second-largest, while Russia ranked third with 800.

COSL's attempted investment may be dwarfed by the mainland's first major oil acquisition in Russia the US$3.5-billion purchase by the mainland's major, Sinopec, of the Udmurtneft oilfield.

The deal would pave the way for the mainland to begin exporting drilling equipment to Russia, an added bonus business mainland firms had been hoping for.

COSL now gets 17 per cent of its revenue from services outside the mainland. It aims to raise that share to 30 per cent by 2010, Chen said.

(HK Edition 12/09/2006 page3)