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Emirates National Oil Co., Dubai’s government-run refiner, offered to buy the rest of Dragon Oil Plc for about 1.1 billion pounds ($1.8 billion) to tap deposits in Turkmenistan and make up for dwindling supplies and meet rising demand at home.

The bid by Emirates National, known as ENOC, of 455 pence a share for the 48.5 percent of the Dubai-based explorer it doesn’t already own is 35 percent higher than Dragon Oil’s closing share price on June 3. Two days later, ENOC said it was considering an offer at a “modest premium.” Dragon Oil surged the most in London trading since it was first approached.

ENOC is seeking overseas assets to expand into oil and natural-gas production, which made up about 5.5 percent of Dubai’s $62 billion economy in 2007. Peter Hutton, a London- based analyst at NCB Stockbrokers Ltd., said investors should reject the offer because the financial crisis in the emirate is hampering ENOC’s ability to offer a fair price.

“This is what ENOC can afford to pay, not what these assets are worth,” Hutton said. “It is a take it or leave it choice and investors should leave it.” He raised his target price for Dragon Oil to 805 pence from 540 pence.

Dragon Oil surged as much as 9.3 percent, the steepest intraday advance since June 4. It traded up 8.7 percent, or 35.75 pence, at 445.75 pence as of 2:49 p.m. local time. The stock has jumped 37 percent since June.

Studying Acquisitions

National oil companies are studying acquisitions to shore up supplies. China Petrochemical Corp., the country’s second- biggest oil company, in June agreed to buy Geneva-based Addax Petroleum Corp. for C$8.3 billion ($7.7 billion) to secure Kurdish reserves.

Taking over the whole of Dragon Oil, which has blocks in Yemen as well as assets in Turkmenistan, will mark an “important step” in ENOC’s ambition to become a major integrated oil and gas company, according to a statement today.

Turkmenistan is opening up its resources to international companies after years of isolation. As holder of the world’s fourth-biggest gas reserves, it aims to boost output to as much as 250 billion cubic meters of gas and 100 million metric tons of crude oil a year.

Dragon’s main assets include two oil and gas fields in the Cheleken contract area of the Caspian Sea, off the coast of Turkmenistan. Average daily production in the third quarter increased 9 percent from a year earlier to 46,060 barrels of oil a day, with about 54 percent attributable to Dragon.

‘Good Rates’

Last month, Dragon said it has seen “good rates” from the six wells completed so far this year. Average gross field production is forecast to rise about 10 percent in 2009 and climb further in the next two years.

The explorer had proved and probable oil reserves of 645 million barrels and 3.2 trillion cubic feet of gas resources at the end of June 2008.

ENOC, which also operates oil storage terminals, plans to fund the bid with its own cash as well as debt financing from Standard Chartered Plc and the National Bank of Dubai, according to the statement. It said the offer values the whole of Dragon Oil at around 2.36 million pounds.

An independent committee from Dragon Oil, which has recommended the bid, is being advised by HSBC Holdings Plc and Davy Corporate Finance. ENOC’s advisers are Standard Chartered and Goodbody Stockbrokers.

NCB’s Hutton said the Dubai energy company needs the support of 75 percent of minority shareholders to complete the deal.

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