With increasing consolidation in the oil industry, a complete takeover of Dragon Oil is a possibility, the company's annual general meeting was told yesterday. Dragon is currently looking for buyers for 46 per cent of the company, after its largest shareholder and chairman, Mr Arifin Panigoro, announced he intends to dispose of his stake.

The company's finance director, Mr Graeme Thomson, said a takeover may result from the current search for buyers. If this happens, the board of Dragon will seek to maximise the value for shareholders from the deal, he said. Any buyer who acquires more than 30 per cent of the shares is obliged under stock exchange rules to make a bid for the whole company.

He said the company is at "an early stage" in its review of various strategic options and does not expect to resolve the issue in the short term. He added that Mr Panigoro is committed to an orderly disposal of the stake, rather than a "fire sale".

Mr Thomson said it would be "preferable" to have the 46 per cent stake held by several shareholders rather than one. Asked what price he would place on the company in the event of a takeover Mr Thomson said it would be inappropriate for him to comment.

One shareholder pointed out that Dragon shares "have been languishing and have lost almost half their value" in recent months, mainly caused by a slide in world oil prices.

In a separate announcement, the company said it has purchased a rig for its drilling operations in the Caspian Sea, for $3.9 million. The rig is currently being refurbished in Britain and a platform is being prepared in the field to receive the rig. Drilling should begin sometime in October.

Dragon is also in "advanced discussions" with a leading international drilling to form a 50-50 joint venture to provide drilling and other services at the Caspian operations.