updated 6/24/2009 3:30:57 PM ET 2009-06-24T19:30:57

China's Sinopec will acquire oil explorer Addax Petroleum for $7.2 billion, flexing some of the country's economic clout in what would be the largest overseas takeover ever by a Chinese company.

Sinopec, a refiner, would gain access to substantial reserves in West Africa and the Middle East if the deal is approved.

Four years ago, China National Offshore Oil Company Ltd. withdrew an $18.5 billion bid for the Unocal Oil Company because of a tremendous backlash in Washington.

Geneva-based Addax, which previously said it was considering a sale, said Wednesday its board unanimously backed the deal, which still must be approved by regulators. The company is listed on exchanges in London and Toronto.

Addax said it produced 134.7 million barrels a day of crude oil in the first quarter of this year.

Beijing is pushing to lock up precious commodities as its economy grows.

Beijing-based Sinopec, which is formally known as China Petroleum & Chemical Corp., is China's biggest refiner by capacity.

If the company can add exploration and production capacity, it would help cushion against spikes in global crude oil prices. The company has posted billions in losses in recent years due to caps on domestic fuel prices.

"There's no secret that China has made a policy that it wants its firms to go forth and secure the natural resources that China believes it needs for its development," said Brad Setser, a fellow at the Council on Foreign Relations.

Chinese companies are becoming more competitive on a global scale, but they can't compete with majors such as Exxon Mobil Corp. and Royal Dutch Shell.

So the companies are going into places that oil majors are less likely to go, said Erica Downs, Chinese Energy Fellow at Brookings Institution Washington.

That includes places like Sudan, where China is a top trading partner.

"Good reserves in stable places have been locked up by the big multinationals," said Nick Lardy, an expert on China's economy at the Peterson Institute, a Washington think tank. "If you're a new player and you have a substantial appetite for access to oil on some long-term basis, then you are more or less forced to go into high risk places where the majors are not willing to tread."

Sinopec, a wholly owned subsidiary of China Petrochemical Corp., will pay $46.17 per share.

The offer is a 47 percent premium to closing market price for Addax on June 5, the day prior to it's public announcement of sales talks.

"We are pleased that Sinopec has recognized the highly attractive asset portfolio and exceptional team that we have assembled at Addax Petroleum," CEO Jean Claude Gandur said in a statement.

Shares of Addax Petroleum Corp. jumped more than eight percent to $49.74 Canadian in early afternoon trading on the Toronto stock exchange.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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