China National Petroleum Corporation and India’s Oil and Natural Gas Corporation are close to clinching a purchase of Syrian assets worth about $1bn (€847m) in a deal driven by the hunger for energy of two of the world’s fastest-growing economies.

People close to the situation said that a joint bid by CNPC and ONGC – the first alliance between Chinese and Indian state energy groups – was the favourite to win a 38 per cent stake in Al Furat Production Company, Syria’s largest oil producer, which is being sold by Petro-Canada.

They said the deal for the holding in the company, which is majority-owned by Royal Dutch Shell, could be signed this week. However, they warned that the agreement had not been finalised and could be delayed or scrapped because of regulatory, political and financial issues.

A successful bid by CNPC and ONGC, which are believed to have been advised by Citigroup, could cement an alliance between two state-owned companies that have been competing fiercely for energy assets around the world. It emerged that Mani Shankar Aiyar, India’s petroleum minister, planned to visit China next month to discuss, among other issues, further co-operation between the two countries’ oil majors.

China and India recently stepped up their search for overseas acquisitions for the natural resources needed to sustain their rapid economic growth.

CNPC beat ONGC in a battle for control of PetroKazakhstan, while the two companies are reported to be considering rival bids for Nations Energy, a Canada-based company with oil fields in Central Asia.

A large investment by CNPC and ONGC in Syria might raise concerns that Chinese and Indian oil groups are looking in countries outside the US sphere of influence, in spite of potentially greater economic risks.

Investment bankers say the political backlash that scuppered a $19bn hostile bid by China’s CNOOC for US rival Unocal earlier this year has prompted Asian companies to look to the Middle East and Africa for acquisitions.

The purchase of a stake in the Al Furat venture would go some way to meeting China and India’s demand for energy. However, production in the Syrian group’s fields has fallen from 390,000 barrels a day in 1995 to about 177,000 b/d this year. The venture is estimated to have produced 10.6m tonnes of oil last year.

Petro-Canada acquired its stake as part of its C$3.2bn (€2.3bn) takeover of the international oil and gas operations of Germany’s Veba Oil in 2002.

The companies and Citigroup declined to comment.

Additional reporting by Enid Tsui in Hong Kong

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