China's state-owned oil company Sinopec is mulling over the proposal to acquire Gulf Keystone Petroleum Ltd., an oil-refining company based in the Kurdistan region of war torn Iraq, Bloomberg reported.

Sinopec Corp, which is Asia's largest refiner, is working with strategic advisors for the acquisition process and has already made a formal approach to Gulf Keystone, people familiar with the matter told Bloomberg.

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Gulf Keystone has been mired in financial crisis because of low oil prices and failure to recover export payments from Kurdish regional government. The company's stressful balance sheet has had a very adverse impact on its market capitalization.     

According to Reuters, the Kurdish-based oil company's current market valuation has crashed to 290 million pounds ($368 million) after Monday's trading. The firm at one point was reportedly valued more than $400 million.

Earlier this year, Gulf Keystone gave a green signal to swap its $500 million of debt for equity, resulting in huge loss for all its shareholders.

Norwegian energy firm DNO ASA in July made an acquisition offer to buy Gulf Keystone for reportedly $300 million. However, the deal could not take off as the latter failed to fulfil certain conditions related to its debt restructuring.

So far, there has been no response from either Sinopec Corp. or Gulf Keystone on the report.

Bloomberg's report claimed that Gulf Keystone has attracted interest from other bidders as well but did not reveal names of the suitors.          

After the report of acquisition, Gulf Keyston stock rose 13 percent to 143 pence ($1.82) at London Stock Exchange on Tuesday morning. 

TagsSinopec Corp, Gulf Keystone Petroleum Ltd, china, China and Iraq