Associated Press

Taipei, June 23:

The bid by China’s state-owned CNOOC Ltd to acquire US oil company Unocal Corp is part of a Chinese effort to secure foreign oil and gas reserves to meet the country’s growing energy needs, analysts say. On Thursday, China’s third-largest oil producer announced it was ready to pay $18.5 billion (euro15.4 billion) for the El Segundo, California-based corporation. The offer put it at odds with US-based Chevron Corp whose earlier bid of $16.6 billion (euro13.7 billion) had been accepted by Unocal. Unocal said it would evaluate the CNOOC offer, but emphasized that its board’s earlier recommendation to shareholders to accept the Chevron bid remained in place. Unocal has oil and gas reserves of about 1.7 billion barrels of oil equivalent, an industry measure that combines the fuel potential of major hydrocarbon variants, making it the eighth largest American oil company. Outside of the United States, it has major oil and gas holdings in Azerbaijan, Myanmar, Thailand and Indonesia. Foreign energy analysts say CNOOC’s Unocal bid is a continuation of a process begun by Chinese energy companies in the late 1990s to acquire overseas energy assets to compensate for static or falling domestic oil and gas production.

Major Chinese acquisitions have already been made in Kazakhstan, Venezuela, Iraq, Iran, Peru, Azerbaijan, Sudan and Indonesia. “It’s been a common theme for them in recent years,” said Daniel Hynes of ANZ Bank in Melbourne, Australia. “I think (this deal) is a case of the Chinese trying to secure supply for their own purposes. With their oil needs growing exponentially, securing this asset would put them in very good stead for the future.” Fueled by red-hot economic growth, China’s oil imports in 2004 exceeded 2 million barrels per day. The US Department of Energy expects that figure will climb to 9.4 million barrels by 2025, an estimate that some experts say is conservative. Victor Shum of Texas-headquartered Purvin & Gertz in Singapore said that beyond oil, a successful bid for Unocal would also be a boon for China’s plans to increase its reliance on natural gas as a fuel of choice in electricity generation and other energy areas.

Gas usage now accounts for only three per cent of the total Chinese energy pie, but government plans call for that proportion to double by 2010. “Unocal is strong in Asia, particularly in gas,” he said. “Because of the geographical location of projects in places like Indonesia, Thailand and Myanmar, these assets make a very good fit for CNOOC.” Both Hynes and Shum said a successful CNOOC bid for Unocal would not interfere with efforts by energy companies in Japan and South Korea to secure oil and gas reserves, because the commodity nature of the products allow for them to be purchased on the open market. However, Tetsu Emori of Mitsui Bussan Futures in Tokyo said if a CNOOC purchase of Unocal goes ahead, the development could worry Japanese and South Korean companies, which are experiencing difficulties in securing foreign sources of supply in politically stable countries. “I think Japan and South Korea have fallen far behind China,” he said. “This is a very good purchase because it is in the United States. It is clear we have fallen behind.”