ANALYSIS-CNOOC could seek more small deals after Argentina

* Having failed to clinch big deals, CNOOC thinks smaller

* Chinese oil companies seen seizing chances to expand

* CNOOC may be interested in Bridas's Turkmenistan assets

By Hugh Bronstein

BUENOS AIRES, March 15 (Reuters) - China National Offshore Oil Corp (CNOOC) should follow up its purchase of a stake in Argentina's Bridas Holdings with more mid-sized acquisitions in regions being avoided by big western firms.

CNOOC's $3.1 billion purchase of Bridas, a privately held gas and oil company, followed failed bids in recent years for bigger companies such as California-based Unocal and Argentine energy company YPF. The Unocal deal ran into stiff political opposition in the United States.

"We can expect to see CNOOC going into areas in Latin America and Africa that most western oil companies are shying away from," said New York-based Fadel Gheit, managing director of oil and gas research at Oppenheimer & Co.

"They are not going for grand slams any more. They are going to singles and doubles," he said. "If there is an opening, they are going to be there. They have the money and they want to deploy it as soon as possible into hard assets."

CNOOC and PetroChina are also looking for production opportunities in West Africa, Ghana, Nigeria, and Angola. Analysts say the Chinese companies could turn their attention toward other smaller Argentine exploration and production companies as well.

The Bridas deal shows CNOOC, China's top offshore oil producer, driving to build reserves as it invests in ageing fields in Argentina, Bolivia and Chile. ID:nSGE62EOMT Bridas also has substantial natural gas opreations in Turkmenistan.

The uncertainty involved in investing in Argentina ahead of 2011's presidential election may be outweighed by the potential rewards of feeding Chinese energy demand. ID:nLDE62EOM1

Since Argentina's historic, $100 billion 2001/2002 debt default, many investors have viewed the country as unacceptably risky. Markets frown on the state-centered policies of left-leaning President Cristina Fernandez.

NEW INVESTMENT CLIMATE?

News of the Bridas deal comes weeks ahead of Argentina's planned reopening of its debt restructuring aimed at boosting investor sentiment by swapping $20 billion in bonds left over from the country's default eight years ago.

If petroleum prices rise and Argentina improves its image among investors, oil exploration could get a boost and CNOOC may win its bet on Bridas.

"Direct foreign investment in Argentina has been falling but the Chinese may be betting that in the future there will be less state intervention in the economy," said Buenos-Aires-based energy sector analyst Francisco Mezzadri.

"They may want to have a position here thinking that Argentina will adopt a new set of rules once a new government regularizes debt payments and opens up the economy after 2011," Mezzadri said.

By acquiring half of Bridas, CNOOC is partnering with the company's owner, Argentine tycoon Carlos Bulgheroni, known for high-risk gambits. One appealing asset from the Chinese point of view could be the company's large natural gas operations in Turkmenistan, which have been subject to regulatory wrangling.

"The Chinese should also be interested other assets in Bridas's portfolio, not just what the company has in Argentina," Mezzadri said.

Bridas holds a 40 percent stake in Pan American Energy, an Argentina-focused oil and gas producer 60 percent-controlled by BP Plc. Pan American has output of around 220,000 barrels of oil equivalent (boe) per day, equally split between oil and gas.

"Today it is difficult to attract capital to a country with so much uncertainty in tax policy," said former Argentine Energy Minister Alieto Guadagni.

"But the future could see active exploration by investors with a new government a new rules of the game."

YPF, the local unit of Spanish oil major Repsol, is a much bigger company than Bridas.

It controls more than half of Argentina's refining capacity and nearly 40 percent of its oil output. It has three refineries with a combined refining capacity of just over 50,000 million liters of crude per day. (Additional reporting by Guido Nejamkis in Buenos Aires and Sui-Lee Wee in Hong Kong; Editing by David Gregorio)