Chinese state oil company, CNPC, is to pay €3.4 billion for PetroKazakhstan in what would be China's first successful takeover of a foreign-listed energy firm and the latest move in its aggressive push to secure more oil.
But CNPC's path to closing the deal quickly became more difficult as India's state-run Oil and Natural Gas Corporation said it was working on a counter-bid.
The deal would give CNPC access to PetroKazakhstan's 150,000 barrels per day of production - a small fraction of China's six million barrel daily use but an important step for the world's second-largest oil-consuming nation and fastest-growing major economy.
It also comes just weeks after compatriot CNOOC Ltd. was foiled in its bid to acquire the American producer Unocal for $18.5 billion.
"It's a very high price but this is a strategic investment. Finally, it's reserves that you can bring to China," said Stephen O'Sullivan, oil analyst at United Financial Group in Moscow.
CNOOC's failure to acquire Unocal, in the face of unexpectedly heavy political backlash in Washington was widely seen as only a temporary setback to China's national oil plans.
The deal is not considered a sure thing, however. PetroKazakhstan has a rocky relationship with Kazakh authorities, and has fallen out with Russia's LUKOIL its partner in a joint-venture in the Central Asian country.
CNPC will also have to contend with a potentially larger offer from India's ONGC, which said it would make a counter-offer if asked to do so by PetroKazakhstan. One oil ministry official, who declined to be named, said the Indian government believes ONGC would make a counter-offer even without a request to do so.