For Fu Chengyu, the acquisitive chairman of Sinopec Corp, a battle of wits looms on Friday as a consortium backed by the Chinese oil giant faces a deadline on whether to pursue its unsolicited $2.2 billion offer for China Gas Holdings.

Seven months after the natural gas distributor rejected a takeover offer from Sinopec and ENN Energy Holdings , the endgame may be in sight for Hong Kong's first ever unsolicited takeover battle, sources say.

China Gas shares have consistently traded above the HK$3.50-per-share offer price as some of its key shareholders jostled to raise their stakes in the company.

The consortium, which had already extended the offer period twice, set July 6 as the "long stop date", meaning if the pre-conditions - including winning necessary regulatory approval - set out in the indicative proposals are not met by that date, the consortium can drop the offer.

On the same day, ENN shareholders are set to vote on the offer.

"They will either let it lapse, or extend it by a very short period. Nobody is in a mood for long extension," one person familiar with the process said. "People are tired of this deal"

Buying China Gas would give Sinopec and ENN access to China's largest portfolio of natural gas distribution projects. China Gas, which has piped gas operations in 151 cities, reported a 52 percent rise in net profit for the fiscal year ended March 2012 to HK$954 million ($123 million) on strong gas sales.

The China Gas battle has become complicated after Beijing Enterprises Group (BJEG), parent of utility Beijing Enterprises Holding Ltd, started buying shares in the target company, further frustrating Sinopec chairman Fu's plans.

Last week, Beijing Enterprises raised its stake to 18 percent, paying between HK$3.68 and HK$4.00 a share.

It's rare for Chinese state-owned companies to fight for the same asset, and bankers say one way to resolve the situation is to get Beijing Enterprises and Sinopec to work together. But BJEG, controlled by the Beijing city government, has kept its cards close to its chest, declining to reveal whether it would launch a counter offer for China Gas or join the consortium.

The premium investors have been willing to pay above the offer price for China Gas shares suggests they are betting on a higher offer from the consortium or a counter bidder emerging.

GAS BOOM

For the Sinopec/ENN consortium, getting control of China Gas is an uphill task as about 51 percent of its shares are now controlled by BJEG and two other investors, a tie-up between London-listed Fortune Oil and Liu Minghui, former managing director of China Gas, and a unit of South Korea's SK Group.

China Gas's attraction is the expected pick-up in gas consumption in the world's second-biggest economy.

China is moving to double the share of gas in its overall energy supply to more than 8 percent by 2015, when consumption is forecast to reach 260 billion cubic metres (bcm), while coal will be cut to just over 60 percent. By 2030, gas use will hit 500 bcm, about what the European Union consumes today, according to industry forecasts.

ENN Chairman Wang Yusuo and his family hold about 31 percent of the company, which makes is relatively easy for ENN to secure the shareholder approval for the offer.

A top ENN executive declined comment.

Sinopec, Asia's largest refiner, does not need shareholder approval as the deal value is relatively small compared its $84 billion market value.

For ENN, which owns 55 percent of the acquisition vehicle, a higher offer would over-stretch its balance sheet. Already Standard & Poor's and Moody's have put ENN's debts on review for possible downgrades.

Some say there is a chance that ENN may drop out of the consortium, paving the way for Sinopec to raise its offer.

"Sinopec will likely go alone on the deal," said Peter Yao, analyst at Bank of China International.

Sinopec officials were not available for comments.

The other option for Sinopec is to walk away. But that would not only be an embarrassment to Sinopec's Fu, it would also prevent the two suitors from approaching China Gas with a fresh offer for the next 12 months.

That would be a gamble, as would it leave the door open for the likes of Beijing Enterprises to stalk China Gas.

Fu, also the chairman of Sinopec Corp's state parent Sinopec Group, which has spent at least $32 billion buying global oil and gas assets in the last three years, started looking at buying China Gas last summer, said a source familiar with the matter.

China Gas caught the eye of Fu because of China's rapidly-growing gas consumption, a fragmented shareholding structure of the company and persistent weakness in China Gas's share price following the detention of Liu Minghui in December 2010 on allegations of asset embezzlement, the source added.

Liu has since been released on parole, according to Chinese media reports.

Fu, who teamed up with ENN as he needs ENN's gas distribution expertise to run China Gas, has said the consortium's acquisition of China Gas would "greatly" benefit the target company and its shareholders.

"(ENN) is a professional city gas distributor and Sinopec is a company with energy security. Cooperation by these two companies will add value to its shareholders," Fu said a day after he announced the offer for China Gas.