Cnooc drops Unocal bid amid US opposition

Aug 2 | Updated: Aug 3 2005, 05:30am hrs
Cnooc Ltd abandoned an $18.5 billion takeover of Unocal Corp after the bid, the largest attempted acquisition by a Chinese company, ran into political opposition from US lawmakers. The decision leaves Chevron Corp as the sole bidder for the US oil and gas producer.

The Chinese company, 70.6% owned by its state-controlled parent, said in an e-mailed statement that it would withdraw the offer made on June 23 to acquire El Segundo, California-based Unocal. Unocal shares on Tuesday fell for a third day, by as much as 77 cents, or 1.2%, to $63.60.

Cnooc chairman Fu Chengyus effort to take over Unocal stoked concern among politicians about compromising economic and national security at a time when crude oil is trading near a record. The announcement is likely to spur gains in Cnooc shares, which lagged behind other energy stocks.

The Chinese are not going to stop trying to acquire American oil assets, said Stephen Leeb, who manages $100 million of stock including PetroChina, and Chevron, at Leeb Capital Management in New York. The Chinese believe oil is an ever-more-dear commodity that is going to just get harder and harder to find.

Unocal would have doubled Cnoocs oil and gas output and boosted its reserves 79%. Chinese oil companies such as Cnooc, the countrys third-largest, are seeking overseas deposits because domestic production has failed to keep pace with soaring demand. Spurred by a surging economy, Chinas oil demand has more than doubled during the past 10 years, turning the nation into the worlds second-largest oil user after the US.