State-run Korea National Oil Corporation (KNOC) has agreed to buy Canada-based Harvest Energy Trust’s issued and outstanding trust units at C$10 price per unit for C$1.8bn (US$1.7bn).

The acquisition, which is in line with KNOC’s North American growth strategy, includes Harvest’s oil and gas reserves, the expansion of Newfoundland and Labrador refineries, and the assumption of C$2.3bn (US$2.2bn) debt.

According to reports, based on the transaction’s overall equity and debt value and Harvest’s 219.9 million barrels of proved onshore oil and gas reserves, the acquisition works out at nearly US$18 per barrel equivalent.

KNOC will be capable of generating 120,000bpd of oil after the takeover. The deal will help the company move closer to its 2012 target of generating the equivalent of 18.1% of its oil and gas demand, equivalent to 300,000 barrels.

The takeover, which is considered one of South Korea’s biggest overseas energy deals, will raise the country’s self-sufficiency rate to 8.1% from 6.3%.

South Korea will now be able to generate 241,000bpd and own 3.02 billion barrels of proved oil reserves.

The arrangement agreement is subject to formal authorisation by the KNOC board on or before 29 October 2009.