China's second-biggest oil company has gained reserves in Iraq and Africa after agreeing a record-breaking merger with a Swiss oil explorer.
Sinopec, a subsidiary of China Petrochemical Corporation -Asia's largest oil refiner -agreed to pay $7.2bn for Geneva-based Addax Petroleum Corp in its biggest overseas acquisition to date.
Sinopec said in a statement the deal was a "transformational transaction" which would "further enable it to achieve its strategic objective to build a stronger presence and operations" in West Africa and Iraq.
The purchase of Addax is part of China's efforts to secure energy reserves to fuel its growing economy.
'Acceleration of development'
Addax, which is listed in Toronto and London, is one of the largest independent oil producers in West Africa and the Middle East, with oil fields in Nigeria and the autonomous Kurdish region of northern Iraq.
The company said it produced an average of 134,700 barrels of crude oil a day in the first quarter of 2009.
"The efforts and accomplishments that Addax Petroleum has achieved thus far will be built on through increased investment in the business and acceleration of development and exploration plans," Jean Claude Gandur, the company's president, said in a statement.
"While Addax Petroleum will cease to be a publicly traded company, we look forward to continuing our business in the countries in which we operate for the benefit of all stakeholders."
One of Addax's key assets is its Kurdish fields which include Taq Taq, and which have the capacity to pump up output sharply in the coming months.
The fields also have potential for further exploration.
The Addax deal comes amid a flurry of merger activity in recent weeks among oil exploration and production companies.
State-controlled Sinopec, PetroChina and CNOOC Ltd have been bidding for reserves and supplies against Indian and other Asian rivals in regions most western companies consider too risky to invest in.
Dan Barclay, the head of mergers and acquisitions, Canada, of the BMO Capital Markets, said very few parties were "interested in taking Africa risk at this stage".
"It's really the guys like the Chinese and the Indians that are naturally buyers for that."
Some analysts say Sinopec may sell off the Kurdish assets to another party because of the political risks attached.