Petrochina, China's top oil company, is in talks with Canadian number five Husky Energy about a multi-billion dollar bid.

Husky confirmed the talks about what it called "potential transactions" were under way, although it refused to give any more details, warning that there was no guarantee of a deal.

Earlier reports suggested a bid could cost Petrochina about $4.4bn (�3.1bn), amounting to about $5 per barrel of oil equivalent (boe) or twice Petrochina's own current valuation of $2.50 per boe.

The news meant Husky's shares were suspended on the Toronto stock exchange, after soaring nearly 14%.

Strategic fit?

Initially, though, there were some questions about why Petrochina should choose to look so far afield for its first major move outside Asia.

The company - in which UK oil giant BP has a stake - has been in talks with Russian oil firms about involvement in a Siberian pipeline project.

Aside from that, Canada was not an obvious first choice, analysts said.

Husky's core business is in heavy crude oil production in Canada, while it also has a chain of service stations there and a plant turning heavy oil into light crude.

There is also a 40% stake in a South China Sea development run by Chinese state-owned firm CNOOC.

But some pointed out that 72% of Husky is owned by Hong Kong magnate Li Kashing, who is closely connected to the mainland government in Beijing.

And Hong Kong-based bank CLSA pointed out that Petrochina's lack of offshore oil prospects meant it had few other options.

"The math doesn't look particularly attractive, but overseas acquisitions are the only way Petrochina is going to grow," CLSA said in a research report.