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Analysts don't see oil bid as a threat

WASHINGTON - The acquisition of Unocal Corp. by China's state-owned oil company CNOOC Ltd. would not pose a threat to the United States' energy security, industry analysts said Thursday, arguing that fears being stirred up in Congress are unwarranted.

These oil experts said the knee-jerk response from some in Congress could backfire by making it harder for U.S. oil giants to gain the international access they need in order to grow. Moreover, they said a deal between CNOOC and Unocal could benefit U.S. companies, consumers and workers in the long run.

"You don't want us to get into the ugliness of trade issues," said Lawrence Goldstein, president of the nonprofit Petroleum Industry Research Foundation in New York. "This is not a company building military aircraft or missile technology. This is energy, at the end of the day."

Energy analyst Antoine Halff at the Eurasia Group in New York said that while Congress may seek to use the CNOOC bid as an opportunity to negotiate with China on a variety of trade issues, the rhetoric about America's national security being threatened was misguided.

"Ensuring that Chinese energy needs are met is something that is of vital interest," he said. "Not just for China, but for the entire world, because the Chinese economy is so intimately entwined with the world economy, and especially the U.S. economy."

China's third-largest oil producer made a hostile $18.5-billion bid Thursday for Unocal, the ninth-biggest U.S. oil company.

But even before the communist nation formally announced a rival to Chevron Corp.'s $16.6-billion offer, reports that the bid was in the works prompted members of Congress to send President Bush a letter last week warning him of the threats posed by China's "pursuit of world energy resources."

"Such an acquisition raises many concerns about U.S. jobs, energy production and energy security," Rep. Richard Pombo, R-Calif., and Rep. Duncan Hunter, R-Calif., said in their letter.

A separate letter to Treasury Secretary John Snow was circulating in Congress on Thursday, also calling on the Bush administration to investigate the national security implications of the proposed deal. It had been signed by Rep. William Jefferson, D-La.; Al Green, D-Texas; Bobby Jindal, R-La.; and Kevin Brady, R-Texas.

China became a net importer of oil in the 1990s and recently surpassed Japan as the second-largest consuming nation behind the United States, Energy Department statistics show.

Because Unocal's resource base in the United States is relatively small - it is Unocal's Asian assets that CNOOC is really interested in - analysts said there is no genuine supply threat to the U.S. market, which imports almost 10.5-million barrels of oil per day.

CNOOC said the acquisition would more than double its production and estimated that 85 percent of the reserves of both companies are in Asia and the Caspian Sea region.

Indeed, China's hunger for the oil and natural gas needed to fuel its economic expansion may result in huge investments to expand the combined company's production around the globe, which will help alleviate existing supply constraints that have helped push prices as high as $60 a barrel, analysts said.

"Anyone willing to invest in finding supply is doing the world a favor," Goldstein said.

Oil analyst Fadel Gheit at Oppenheimer & Co. in New York said it would be the "pinnacle of hypocrisy" for the United States to put up 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. "Remember, Exxon Mobil generates 70-80 percent of its revenue outside the United States."

[Last modified June 24, 2005, 00:46:17]