Chinese oil firm Sinopec Group has agreed to buy Tanganyika Oil, a small producer of heavy oil in Syria, for $2 billion, Tanganyika Oil said.

China’s big three state-owned energy firms — CNPC, Sinopec, and offshore specialist CNOOC – have spent years hunting for oil deals to fuel the economic boom back home, but they have faced fierce competition from other Asian buyers.

Tanganyika Oil, which is listed in Toronto and Stockholm, said its board had recommended Sinopec’s bid of C$31.50 for each of its 65.615 million shares, representing a substantial premium to its recent share price and valuing the firm at C$2.07 billion ($2 billion).

Tanganyika Oil’s Canadian shares traded as low as C$14.21 earlier this month, before the company said it was in exclusive talks over a deal. Its Swedish shares were up 20 percent at 0858 GMT.

Sinopec Group, which is Asia’s top oil refiner and the parent company of Sinopec Corp.

The acquisition of Tanganyika Oil brings it 184 million barrels of proven heavy oil reserves at a cost of roughly $10 a barrel, said Larry Grace, an energy analyst at Kim Eng Securities in Hong Kong.

"That’s good, but it’s heavy oil and it’s in Syria and not producing all that much right now. Compared to just one of Sinopec’s fields in China it’s minuscule," he said, noting that production was expected to grow from 6,000 barrels per day to up to 12,800 bpd this year.

The consistency of the oil means it is likely to be refined close to the production site rather than exported.

The deal marks a win for Sinopec over other acquisitive Asian energy firms such as India’s Oil and Natural Gas Corp, which last month beat Sinopec to buy Imperial Energy, a small London-listed oil firm producing in Russia for $2.6 billion.

Earlier this month, newspaper reports said ONGC was looking to buy Tanganyika for between $1.2 billion and $1.5 billion.

China’s acquisition strategy has favoured states whose governments are more open to Chinese involvement, especially in Africa and Latin America, which has led China into oil-producing areas considered to have a lot of political risk.

"(Tanganyika Oil’s project) is up in the Kurdish areas in the northeast of Syria, near the Kurdish part of Iraq," Grace said. "You’ve got a smorgasbord of political infighting."

Chinese state companies tend to buy up foreign assets with the aim of eventually injecting them into their listed subsidiaries. But Sinopec Corp, which is short of cash because of its obligation to sell fuel at low prices in China, is unlikely to take over the Tanganyika asset in the near future, Grace said.

(AFX News & Rigzone)