Sino Union Petroleum & Chemical International's shares soared 36.67 per cent yesterday after it agreed to pay HK$800 million for a Madagascar oil exploration asset from its majority shareholder and oil deal-maker Hui Chi-ming. The main board-listed polyurethane materials distributor, in an announcement to the Hong Kong stock exchange, said that it would buy a 93 per cent stake in Madagascar Energy International to make it a fully owned unit. Sino Union bought a 7 per cent stake from its chairman Mr Hui in June last year for HK$1. Sino Union's shares yesterday closed at 41 HK cents with HK$30 million worth of shares changing hands. For the additional stake, the company will pay Mr Hui HK$100 million in cash and or bonds, HK$300 million by issuing 1.25 billion new shares at 24 HK cents each and HK$400 million by issuing notes convertible into shares at 24 HK cents each. The new shares and conversion price of the notes were at a 20 per cent discount to the 30 HK cents Sino Union shares last traded prior to the announcement. Madagascar Energy, incorporated in the British Virgin Islands in June 2005, has the rights to explore oil and gas for eight years and extract resources found for 25 years at Madagascar oilfield block 3113, an 8,320km onshore site in the African island state. Sino Union said BMI Appraisal had given the block a preliminary estimated value of HK$880 million. Madagascar Energy is required to invest at least US$17.5 million on exploration and will be entitled to 45 to 73 per cent of the profit from the site, with the rest going to the Madagascar government. Sino Union said it planned to finance its share of the investment by bank loans and or share sale. Sino Union is Mr Hui's second Madagascar oil deal with a Hong Kong listed firm. Last year, Madagascar Petroleum International, a company controlled by Mr Hui, sold a 21 per cent stake in another exploration project to unprofitable fraud-prevention services provider Smart Rich Energy Finance (Holdings) for HK$100 million. Madagascar Petroleum raised eyebrows by claiming the project was estimated to have oil reserves of at least 15 billion barrels with a market value of US$900 billion, citing a report by CNPC Liaohe Petroleum Exploration Bureau, a unit of PetroChina's parent China National Petroleum Corp. CNPC Liaohe's spokesman subsequently said he was unaware it had made the reserves estimate. In October last year, Smart Rich's auditor Shinewing (HK) said it was unable to obtain documentary evidence confirming that Madagascar Petroleum had obtained the necessary mining licences and commenced operations.