It is reported that Sinopec Corp, Asia largest refiner and rival PetroChina Co Ltd are poised to seek assets overseas to diversify as domestic earnings are depressed by State controlled prices for processed fuels. Meanwhile offshore oil producer CNOOC Ltd is stepping up its latest acquisition bid overseas.

Financial analysts cautioned that the spending spree may not bring the intended results to the business groups as asset acquisition may meet fierce political resistance. Refining losses resulted in Sinopec reporting a 40.5% decline in H1 net income to CNY 24.5 billion on Sunday.

The nation biggest oil and gas producer PetroChina last week said first half profit declined 6% to CNY 62 billion. The country leading offshore oil producer CNOOC Ltd saw its net profit in the same period tumble 19% to CNY 31.87 billion.

Mr Laban Yu head of Asia oil & gas equity research at Jefferies Hong Kong Ltd said "The loss came purely from the government's policy of capping retail fuel prices. There is not much Sinopec can do. We believe current low inflation will allow higher refiner margins in the second half and quite possibly a change in the fuel-pricing mechanism."

To combat the declining profit growth, the three oil energy producers all strived to increase their overseas energy business portion to offset the sluggishness in the domestic energy market.

Mr Simon Powell oil and gas analyst at CLSA Ltd in Hong Kong said "Overseas acquisition is a short cut to balance refining losses, but it's a gradual process and takes a long time because of political scrutiny and availability of assets globally."

He said that "If the CNOOC deal is approved, we can expect more Chinese energy investment in those countries almost right away."

Mr Dickie Wong Kingston Securities Research Director said "The three energy companies may be very passive in the waiting process for the intended acquisitions to be realized because of rising investor protectionism among the US and European countries."

China State oil companies have spent more than USD 100 billion on assets over the past decade to supply the world largest energy importer.

CNOOC, China biggest offshore oil and natural gas extractor with no refining operations has proposed the nation's biggest overseas acquisition offering USD 15.1 billion for Canada Nexen Inc. Canadian and US regulators are reviewing the takeover.