Sinopec, the Chinese state-owned oil company, is understood to have approached Imperial Energy about making a bid that could trump an existing £1.3 billion offer for the London-listed energy group.

The oil refiner, also known as China Petroleum & Chemical Corporation, is believed to have made an approach for Imperial Energy last week. If successful, it would be the biggest takeover by a Chinese company of a rival listed on the London market.

Imperial Energy's board, which is being advised by Merrill Lynch, has allowed Sinopec to start due diligence immediately.

The company, which has oil-producing blocks in Russia and Kazakhstan, received a cash offer of £12.90 a share last month from the Indian state-controlled Oil and Natural Gas Company (ONGC), although Imperial did not formally name the bidder.

Imperial, whose shares have risen 53 per cent in the past year, declined to comment on the Sinopec bid.

Last year, Imperial was approached by Gazprom, Russia's state-controlled gas company, about taking a stake, but an agreement could not be reached. Last week, the group's share price rose amid talk of another bid approach, thought to have come from ENRC, the miner.

Imperial's shares have been some of the most volatile of mid-sized oil companies in London in the past year. The stock has been as high as £18.60 and as low as 740p. Its market capitalisation is £1.1 billion.

Imperial has built up a number of assets across Russia and other countries in the former Soviet Union. Under the chairmanship of Peter Levine, who founded the company in 2004, it produced about 10,000 barrels of oil per day in December 2007 and aims to increase the figure to 80,000 barrels per day by the end of 2011.

Last month, it said that oil had flowed at the Glukhovskoye 6 well in Russia.

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