Mumbai: ONGC Videsh Ltd (OVL), the overseas investment arm of state-run explorer ONGC, is reported to have taken a lead over rival China's Sinopec with an over $3-billion bid for acquiring Imperial Energy of the UK.

OVL, reports said, may take a Russian partner to counter Sinopec in the battle for acquisition of the Russia-focused oil exploration and production company. Imperial Energy has assets in Russia and Kazakhstan.

State-run OVL, which has received government backing for the investment, may go ahead and launch a full bid for the £1.2 billion explorer, shrugging off challenges from China's Sinopec and KNOC of Korea, reports.

OVL, which submitted an initial bid of £12.90 per share, or about $2.96 billion, is likely to raise it to £15 a share if Sinopec makes a counter offer, reports said, adding, the oil explorer could raise the bid to about $3.5 billion if competition hotted up.

Sinopec has been allowed to do due diligence at Imperial Energy and access its data room, making it the first Chinese challenge to an Indian company in a competitive auction of a London-listed company.

Korean National Oil Company (KNOC) also in the race and has access to the data room.

Imperial's share price has, however, been ruling below the offer price following investor concerns that the Russian government may object to a foreign state owning assets within its borders.

In fact, Russia's state-controlled gas company Gazprom had approached Imperial Energy for taking a stake, but an agreement could not be reached.

ONGC seems to have Russian approval for the bid, reports citing insiders said.

A decision on the deal is expected in a week's time.

A successful deal could bring a £80 million windfall for founder-chairman Peter Levine, who owns a six per cent stake.

At the end of July, Sinopec, which is one of China's biggest state-owned oil companies, gatecrashed the sale of Imperial by launching its own bid.

JP Morgan analysts Andrey Gromadin and Nadia Kazakova said in a research note that the risk of a deal failing ''has dropped considerably".

''We believe intensifying media coverage, reports of state-level negotiations and ONGC's readiness to face competition suggest a strong possibility of a positive outcome."

ONGC currently owns 20 per cent of Russia's Sakhalin I project, but has long been keen to buy more assets in the former Soviet Union.