South Korea's state-controlled oil firm targets Premier Oil

NORTH Sea explorer Premier Oil has been linked with a tentative takeover approach from KNOC, the South Korean state-controlled oil firm that recently swallowed Dana Petroleum.

Industry sources say Premier, listed in the FTSE 250 index with a stock market price tag of about 2.1 billion, is one of a number of North Sea producers with whom the Koreans have held informal takeover talks. KNOC snapped up Aberdeen-based Dana for 1.87bn in September following an initially hostile takeover bid.

It is known to be keen to use up more of the $6.5bn (4.2bn) war chest given to it by the Korean government to secure supplies and cut the country's exposure to rising energy prices.

The Korean group had mandated investment bank Merrill Lynch to seek out suitable takeover targets over the past year, as it also made failed attempts to acquire Burren Energy and Addax Petroleum. City sources say this mandate expires in a few months, which has fuelled expectations that a bid for Premier may be imminent.

The Korean government has told KNOC it must raise its energy asset production to 300,000 barrels a day by 2012. That compares with 140,000 barrels now.