By staff reporter ZhaoJianfei and WenXiu

From Caijing Online

China Petrochemical Corporation (Sinopec Group) is going ahead with the purchase of Canada’s Tanganyika Oil Company Ltd., despite steeply falling oil prices, a source close to the deal said.

The CA$1.9 billion deal had been approved by the National Development and Reform Commission earlier this month, he said.

The purchase reflects Sinopec’s determination to acquire energy resources as the company regards current oil price volatility as short-lived, and the government approval also sends a signal that the “Go Global” policy remains unchanged, the source added.

However, the market has been left guessing whether the deal would go ahead as oil prices have tumbled by more than 50 percent since the deal was announced in late September. On December 2, Sinopec extended the deadline five days to December 24.

Sinopec International Petroleum Exploration and Production Corporation, a subsidiary of Sinopec, made the offer to buy all shares of Tanganyika at CA$31.5 per share, which was at a 21.2 percent premium to the market value. The offer was approved by Tanganyika’s board.

Tanganyika’s oil and gas resources are mostly in Syria, with proven reserves of 184 million barrels. The purchase price suggested that Sinopec was buying the reserve at $10 per barrel. In the first half of 2008, average cost of production in Syrian oil fields was about $10 per barrel.

If either party walks away from the deal, the penalty will be CA$65 million. Nomura Securities acts as the advisor for the deal. Tanganyika’s shares closed at CAD27.69 on December 12.