Two Takes on CNOOC’s Unocal Bid

Two influential Texas congressmen whose House committee oversees energy policy released a letter to President Bush on Tuesday, saying Chinese oil company CNOOC Ltd.’s $18.5-billion bid for Unocal Corp. was a “clear threat” to national security and should be stopped.

In Beijing, meanwhile, the Chinese government made its first public comments on the offer, saying through a Foreign Ministry spokesman that the offer should be considered as a normal business deal without political interference.

CNOOC’s shares jumped $3.20 to $59 as CNOOC and Unocal executives began talks in New York and analysts expressed increased comfort with the financing for the bid.

The Chinese company’s offer is largely backed by loans from its state-owned parent and a Chinese state bank. That represents a premium of about 10% to the cash-and-stock offer by rival oil company Chevron Corp.

But those financing arrangements also added to concerns raised by some U.S. lawmakers who contend that CNOOC is benefiting from Chinese government subsidies.

The political response comes amid other U.S.-China tensions, including U.S. discontent over China’s $160-billion trade surplus with the United States and concerns about China’s growing military strength.

Treasury Secretary John W. Snow, who chairs the committee that would review the CNOOC bid on national security issues, said in a CNBC interview that talk of a review was premature.

But Rep. Joe Barton, chairman of the House Energy and Commerce Committee, and Rep. Ralph M. Hall, chairman of a subcommittee on energy and air quality, urged Bush not to even let the bid go to a review.

“If approved, the transaction would put vital oil assets in the Gulf of Mexico and Alaska directly into the hands of a company controlled by the government of China,” the Republican congressmen said in the letter.

CNOOC would gain Unocal’s prized oil and natural gas reserves in Asia and the Gulf of Mexico as well as its proprietary drilling technology and mining assets. It has promised that almost all of Unocal’s U.S. oil and gas production would be sold into the United States.

In Beijing, Chinese Foreign Ministry spokesman Liu Jianchao told a news conference: “Presently the doubts being raised by people about the cooperation between CNOOC and Unocal are perhaps mostly coming from a political angle.

“I think this kind of business activity is normal business activity. The relevant people should not make a fuss and should not interfere in this kind of business cooperation based on political reasons.”

Some of Unocal’s shareholders said they might pressure Chevron to raise its offer. But Chevron has said it will stand by its original bid.