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Sat, Jul 30, 2005 - Page 12 News List

CNOOC to decide on Unocal bid this weekend


Executives at Chinese oil firm CNOOC are expected to meet this weekend to decide whether to raise its US$18.5 billion bid for Unocal amid reports it may dump the offer altogether due to political opposition in Washington.

The Financial Times cited people close to the situation who said China National Offshore Oil Corp (中國海洋石油) executives will decide this weekend whether to raise their bid. It added that the company was likely to do so.

However in a separate report, the Hong Kong-based South China Morning Post cited people close to the deal as saying CNOOC was preparing to walk away as political pressure from Washington had made it impossible to pursue it.

"There is literally no point to pursue this any further," the newspaper quoted a source familiar with the deal as saying. "The dirty Washington politics has basically killed the deal."

Company spokesman Xiao Zongwei yesterday confirmed CNOOC could make its mind up this weekend and said the company was sticking with its current bid of US$67 a share for now.

"Our position has not changed. We stand with our original bid," Xiao said.

Both reports said China's third-largest oil company was likely to announce the decision next week ahead of an Aug. 10 vote by shareholders of the California-based Unocal on rival Chevron's sweetened offer, which is worth US$63 per share or more than US$17 billion in cash and stock.

The FT said it was understood state-controlled CNOOC has drafted plans to increase its US$67-a-share cash bid to more than US$70, valuing Unocal at about US$19.3 billion, US$2 billion higher than the Chevron offer.

One person familiar with the matter told the newspaper CNOOC could go as high as US$72.

The FT had also reported CNOOC was considering a pledge to sell all of Unocal's US assets, including valuable drilling operations in the Gulf of Mexico, to damp opposition by US lawmakers.

CNOOC has its board's authorization to raise its offer to US$69 per share if necessary.

However, analysts say CNOOC faces too much pressure from Washington to go through with a higher bid.

The controversial bid by CNOOC has faced fierce opposition in the US, with lawmakers raising concerns about allowing a Chinese government-owned company to take over a major US oil firm, arguing Beijing would never allow a reverse situation to happen.

Earlier this week, US lawmakers passed an amendment that would postpone a US government review of CNOOC's proposed deal by over four months, adding further uncertainties.

"It is too difficult for CNOOC to fight against Chevron, Unocal and the US government at the same time," said Shang Ma, a Fitch Ratings oil analyst.

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