Wednesday, July 13, 2005
Bloomberg.com: U.S.
Bloomberg.com: U.S. Print
Cnooc's Unocal Offer Threatens U.S., Witness to Say (Update2) Listen
July 13 (Bloomberg) -- Cnooc Ltd.'s $18.5 billion bid for Unocal Corp. is an ``ominous'' move by China to dominate energy resources for the benefit of its economy and military, Frank Gaffney of the Center for Security Policy plans to tell Congress.
Gaffney is scheduled to appear today before a House Armed Services Committee hearing, the latest sign of the opposition Cnooc faces in Congress as it tries to get Unocal's board and shareholders to abandon a lower offer from Chevron Corp., the second-biggest U.S. oil company. Cnooc is 70 percent owned by state-controlled China National Offshore Oil Corp.
Objections in Congress favor Chevron, which has all the government approvals for the merger and would complete the transaction soon after Unocal shareholders approve it. The company has said the higher price from Cnooc is outweighed by uncertainty over when the deal would get done. Cnooc has countered that it can allay any concerns in a government review.
Congress has been too quick to judge the Chinese bid, said William Reinsch, president of the National Foreign Trade Council. ``It would be nice if everybody would just step back, calm down,'' Reinsch said in an interview July 11. ``The shareholders are the key element here. Let them vote, and then let's see what we've got.''
Representative Joe Barton of Texas, chair of the House Energy Committee, also plans a hearing, on July 19. A resolution passed by the House says a Chinese buyer for a U.S. energy company may threaten national security and ``the nation's economic prosperity.''
Vote
Unocal shareholders are scheduled to vote Aug. 10 on Chevron's cash-and-stock offer, worth $60.68 a share, or about $16.5 billion, as of yesterday. Unocal's board agreed to Chevron's acquisition April 4. Cnooc bid $67 a share on June 23. Unocal has said its approval of the acquisition by Chevron stands and that Cnooc's offer is being examined.
Cnooc's board is expected to meet today to consider raising the company's offer, the Financial Times reported, citing people familiar with the matter. Unocal's board is scheduled to meet July 14 to consider whether it will continue supporting Chevron's offer, the report said.
Cnooc's Chief Financial Officer Yang Hua declined to comment today on the FT report or the House Armed Services Committee hearing.
The U.S. should keep ``for our own use'' the oil and gas reserves owned by American companies, Gaffney said in prepared testimony. With demand for oil surging and prices at all-time highs, ``we will inevitably find ourselves on a collision course with Communist China.''
Gaffney, an assistant secretary of defense in the Reagan administration, is president of the Washington-based center. Vice President Dick Cheney is a former member of the research organization's board, according to its Web site.
Oil, Growth
Oil has doubled in the last two years, as economic growth in China, India and the U.S. lifted demand. Benchmark New York oil futures touched a record $62.10 a barrel last week and ended yesterday at $60.62.
Barton's views echo Gaffney's. ``U.S. strategic interests are not served by selling a U.S.-based oil company to a company that's 70 percent owned by the Chinese Communist government,'' Barton said in a statement, announcing his plans for a hearing later this month.
El Segundo, California-based Unocal has oil and natural gas reserves equivalent to about 1.75 billion barrels of oil, mostly in Southeast Asia, the Gulf of Mexico and the Caspian region. Almost two-thirds of the company's output last year was gas.
Acquiring Unocal would more than double Cnooc's oil and gas output. Fu Chengyu, chairman of Hong Kong-based Cnooc, is attempting China's biggest overseas takeover.
Coal, Oil, Gas
China, which relies on coal and oil for 90 percent of its fuel, wants cleaner-burning gas to account for 8 percent of the country's energy supply by 2010, up from about 3 percent now.
Cnooc has said it would submit to a U.S. government review of any Unocal acquisition. It has vowed to keep Unocal's U.S. output flowing to the domestic market.
The rival bidders for Unocal have joined the politicians' debate. Chevron, based in San Ramon, California, has said that $7 billion in loans from Cnooc's parent company are at below market rates and are an unfair government subsidy.
Chevron Chief Executive David O'Reilly wrote yesterday in the editorial pages of the Wall Street Journal that a Cnooc acquisition, ``would still face a complex and uncertain government review process.''
CNOOC, for its part, began an ad campaign today in newspapers such as Roll Call that circulate on Capitol Hill. One of the ads says the deal ``will keep oil in the U.S. and will protect American jobs.''
Supporters of a Cnooc bid point out that Unocal has the majority of its reserves outside the U.S., particularly in Asian countries such as Indonesia.
National Interest
``What happens to some gas field in Indonesia is really not too vital to the American national interest,'' said Amy Jaffe, an energy expert at the James A Baker III Institute for Public Policy at Rice University. ``What happens to U.S. companies trying to invest efficiently and effectively in energy assets around the world is incredibly important to us.''
Jerry Taylor, an analyst at the Cato Institute in Washington who is scheduled to appear with Gaffney at today's hearing, said Congress is wrong to imply that Chinese control of Unocal would harm U.S. interests in the global oil market.
``China's a net importer, not an exporter, so their interests are low oil prices,'' Taylor said in an interview yesterday. ``Their interests are the same as ours,'' he said. ``I simply don't see any conceivable scenario where U.S. national security is affected in any way by this.''
The resolution the House passed on June 22, by a vote of 398 to 15, says Cnooc has made no commitment to keep the oil Unocal produces outside of North America flowing to the global market, rather than ``shipping it directly to China.''
``I favor the bid that gives my client the most money,'' said Rodney Mitchell, who oversees $395 million as president of the Mitchell Group, a Houston money management firm with 500,000 Unocal shares. ``As an American, I obviously favor the Chevron bid,'' Mitchell said. Still, he said free trade will trump congressional objections in favor of Cnooc.
To contact the reporter on this story:
Jim Efstathiou Jr. in Washington at jefstathiou@bloomberg.net.
Last Updated: July 13, 2005 02:57 EDT
Cnooc's Unocal Offer Threatens U.S., Witness to Say (Update2) Listen
July 13 (Bloomberg) -- Cnooc Ltd.'s $18.5 billion bid for Unocal Corp. is an ``ominous'' move by China to dominate energy resources for the benefit of its economy and military, Frank Gaffney of the Center for Security Policy plans to tell Congress.
Gaffney is scheduled to appear today before a House Armed Services Committee hearing, the latest sign of the opposition Cnooc faces in Congress as it tries to get Unocal's board and shareholders to abandon a lower offer from Chevron Corp., the second-biggest U.S. oil company. Cnooc is 70 percent owned by state-controlled China National Offshore Oil Corp.
Objections in Congress favor Chevron, which has all the government approvals for the merger and would complete the transaction soon after Unocal shareholders approve it. The company has said the higher price from Cnooc is outweighed by uncertainty over when the deal would get done. Cnooc has countered that it can allay any concerns in a government review.
Congress has been too quick to judge the Chinese bid, said William Reinsch, president of the National Foreign Trade Council. ``It would be nice if everybody would just step back, calm down,'' Reinsch said in an interview July 11. ``The shareholders are the key element here. Let them vote, and then let's see what we've got.''
Representative Joe Barton of Texas, chair of the House Energy Committee, also plans a hearing, on July 19. A resolution passed by the House says a Chinese buyer for a U.S. energy company may threaten national security and ``the nation's economic prosperity.''
Vote
Unocal shareholders are scheduled to vote Aug. 10 on Chevron's cash-and-stock offer, worth $60.68 a share, or about $16.5 billion, as of yesterday. Unocal's board agreed to Chevron's acquisition April 4. Cnooc bid $67 a share on June 23. Unocal has said its approval of the acquisition by Chevron stands and that Cnooc's offer is being examined.
Cnooc's board is expected to meet today to consider raising the company's offer, the Financial Times reported, citing people familiar with the matter. Unocal's board is scheduled to meet July 14 to consider whether it will continue supporting Chevron's offer, the report said.
Cnooc's Chief Financial Officer Yang Hua declined to comment today on the FT report or the House Armed Services Committee hearing.
The U.S. should keep ``for our own use'' the oil and gas reserves owned by American companies, Gaffney said in prepared testimony. With demand for oil surging and prices at all-time highs, ``we will inevitably find ourselves on a collision course with Communist China.''
Gaffney, an assistant secretary of defense in the Reagan administration, is president of the Washington-based center. Vice President Dick Cheney is a former member of the research organization's board, according to its Web site.
Oil, Growth
Oil has doubled in the last two years, as economic growth in China, India and the U.S. lifted demand. Benchmark New York oil futures touched a record $62.10 a barrel last week and ended yesterday at $60.62.
Barton's views echo Gaffney's. ``U.S. strategic interests are not served by selling a U.S.-based oil company to a company that's 70 percent owned by the Chinese Communist government,'' Barton said in a statement, announcing his plans for a hearing later this month.
El Segundo, California-based Unocal has oil and natural gas reserves equivalent to about 1.75 billion barrels of oil, mostly in Southeast Asia, the Gulf of Mexico and the Caspian region. Almost two-thirds of the company's output last year was gas.
Acquiring Unocal would more than double Cnooc's oil and gas output. Fu Chengyu, chairman of Hong Kong-based Cnooc, is attempting China's biggest overseas takeover.
Coal, Oil, Gas
China, which relies on coal and oil for 90 percent of its fuel, wants cleaner-burning gas to account for 8 percent of the country's energy supply by 2010, up from about 3 percent now.
Cnooc has said it would submit to a U.S. government review of any Unocal acquisition. It has vowed to keep Unocal's U.S. output flowing to the domestic market.
The rival bidders for Unocal have joined the politicians' debate. Chevron, based in San Ramon, California, has said that $7 billion in loans from Cnooc's parent company are at below market rates and are an unfair government subsidy.
Chevron Chief Executive David O'Reilly wrote yesterday in the editorial pages of the Wall Street Journal that a Cnooc acquisition, ``would still face a complex and uncertain government review process.''
CNOOC, for its part, began an ad campaign today in newspapers such as Roll Call that circulate on Capitol Hill. One of the ads says the deal ``will keep oil in the U.S. and will protect American jobs.''
Supporters of a Cnooc bid point out that Unocal has the majority of its reserves outside the U.S., particularly in Asian countries such as Indonesia.
National Interest
``What happens to some gas field in Indonesia is really not too vital to the American national interest,'' said Amy Jaffe, an energy expert at the James A Baker III Institute for Public Policy at Rice University. ``What happens to U.S. companies trying to invest efficiently and effectively in energy assets around the world is incredibly important to us.''
Jerry Taylor, an analyst at the Cato Institute in Washington who is scheduled to appear with Gaffney at today's hearing, said Congress is wrong to imply that Chinese control of Unocal would harm U.S. interests in the global oil market.
``China's a net importer, not an exporter, so their interests are low oil prices,'' Taylor said in an interview yesterday. ``Their interests are the same as ours,'' he said. ``I simply don't see any conceivable scenario where U.S. national security is affected in any way by this.''
The resolution the House passed on June 22, by a vote of 398 to 15, says Cnooc has made no commitment to keep the oil Unocal produces outside of North America flowing to the global market, rather than ``shipping it directly to China.''
``I favor the bid that gives my client the most money,'' said Rodney Mitchell, who oversees $395 million as president of the Mitchell Group, a Houston money management firm with 500,000 Unocal shares. ``As an American, I obviously favor the Chevron bid,'' Mitchell said. Still, he said free trade will trump congressional objections in favor of Cnooc.
To contact the reporter on this story:
Jim Efstathiou Jr. in Washington at jefstathiou@bloomberg.net.
Last Updated: July 13, 2005 02:57 EDT
# posted by Eastlaw @ 7:00 AM 
