CNOOC tries to ease U.S. security worries over Unocal bid

Thursday, June 23rd 2005, 8:28 am

By: News On 6

BEIJING (AP) _ Trying to allay U.S. national security worries about its bid for Unocal Corp., Chinese state-owned oil company CNOOC Ltd. said Friday it was willing to discuss selling some Unocal assets and putting others under American management.

The announcement came after four members of Congress called on the U.S. government on Thursday to review the security implications of allowing a Chinese state-controlled firm to take control of the ninth-largest American oil producer.

CNOOC's unsolicited $18.5 billion offer Thursday for Unocal was the most ambitious foreign acquisition attempt yet by a Chinese company. It set up a possible takeover battle with rival bidder Chevron Corp. amid efforts by Beijing to secure foreign energy supplies for its booming economy, the world's second-biggest oil consumer.

``We have proactively made assurances to Unocal to address concerns relating to energy security and ownership of Unocal assets located in the United States,'' CNOOC chairman and CEO Fu Chengyu said in a statement released in Beijing.

Fu said CNOOC was ``fully prepared'' to participate in a U.S. government security review. He offered to discuss selling some Unocal pipeline and storage assets and putting assets that aren't involved in oil and gas exploration or production ``under American management.'' He said Washington has approved similar arrangements in the past for foreign buyers of American companies.

U.S. Treasury Secretary John Snow said Thursday he expects both parties to submit to a security review. Snow chairs a federal panel that considers the possible security risks of foreign firms buying or investing in U.S. companies.

``It's not a business transaction at all,'' said C. Richard D'Amato, chairman of the U.S.-China Economic and Security Review Commission, a congressional advisory panel. ``This is not a free market deal. This is the Chinese government acquiring energy resources.''

The Chinese government, which owns 70 percent of CNOOC, has made a multibillion-dollar string of deals with countries ranging from Sudan to Venezuela to secure foreign oil and gas supplies.

``Substantially all of the oil and gas produced by Unocal in the U.S. will continue to be sold in the U.S.,'' Fu's statement said. ``The development of properties in the Gulf of Mexico will provide further supplies of oil and gas for American markets.''

However, it noted that 70 percent of Unocal's oil and gas reserves are in Asia, and didn't say what would happen to those resources.

Many oil industry experts agreed that security fears were unwarranted and warned that such responses could make it harder for U.S. oil giants to gain the international access they need to grow.

Oil analyst Fadel Gheit at Oppenheimer & Co. in New York said it would be the ``pinnacle of hypocrisy'' for the United States to put roadblocks in CNOOC's way, considering that President Bush and others in his administration have repeatedly scolded Russia for not opening its doors wide enough to U.S. oil companies.

``American companies must expand globally, but if we cut off people from coming into our country other countries will just block our companies from doing the same,'' Gheit said.

El Segundo, Calif-based Unocal already had accepted an offer to be bought by Chevron for nearly $16.6 billion in cash and stock. Chevron said it will not sweeten its offer _ at least for now.

``We're satisfied with the bid we have on the table,'' Peter Robertson, Chevron vice chairman, said in an interview on CNBC. ``We think it's still the best opportunity for the shareholders.''

Unocal said its board would consider the hostile takeover bid. The company said late Thursday that Chevron had given it clearance to begin talks with CNOOC about a possible deal.

The offer is the biggest attempt yet in a string of acquisition bids by Chinese companies for American firms. Appliance maker Haier Group and two U.S. private equity firms offered $1.28 billion for Maytag after it agreed to be bought by another U.S. firm. Maytag says it is considering the Haier consortium's offer. Chinese computer maker Lenovo's $1.75 billion purchase of IBM's personal computer division was cleared by a U.S. federal panel in March.