Beijing-based Sinopec Group has agreed to buy Tanganyika Oil Co for C$2.07 billion (US$2 billion), the Canada-based company said yesterday.

Tanganyika, listed in Toronto and Stockholm, said its board has unanimously recommended Sinopec's offer of C$31.50 a share for all the 65.615 million shares outstanding, as it represents a "substantial premium" to its recent prices.

The offer is 21 percent higher than the closing price of the Canadian firm's shares on Wednesday. Its Swedish depository receipts surged about 20 percent after the announcement.

Tanganyika focuses on oil fields in Syria, where it holds operating interests in two production sharing agreements covering two blocks.

It pumps 6,025 barrels of crude oil a day from the fields, or about 0.7 percent of Sinopec's, at an operational cost of US$10.53 a barrel.

Analysts said this appears to be a good deal although the Syrian fields produce heavy crude oil which presents challenges in production, transport and refining compared to light crude.

Win for Sinopec

"This transaction is an important component of Sinopec Group's strategy to become a diversified global resource provider. We believe that our strong technical experience and our local relationships will serve to maximize the underlying value of these very attractive assets," said Zhou Baixiu, president of Sinopec International Petroleum Exploration and Production Corp, the firm's wholly owned unit that made the offer.

This marks a victory for Sinopec over India's Oil & Natural Gas Corp, which is also reported to be seeking to buy Tanganyika for between US$1.2 billion and US$1.5 billion.

ONGC last month beat Sinopec when the Indian firm bought London-listed Imperial Energy Corp, a Russia-focused oil and gas company.

Sinopec has agreed to pay a break-up fee of C$65 million in the event that it fails to obtain necessary Chinese government approval for the deal on or before December 24.

Sinopec Group is the state parent of listed China Petroleum & Chemical Corp, or Sinopec Corp.

(Shanghai Daily September 26, 2008)