Asian reaction to Unocal bid is muted: Report

While the Chinese bid for Unocal has brought calls for a national security review in the United States, the reaction in Southeast Asia, where Unocal has most of its assets, is much more muted, NYTimes.com reported Wednesday.

Unocal seems to have put aside political uncertainty and controversy to develop energy assets from gas fields in the Gulf of Thailand to oil wells and gas platforms off the eastern coast of Borneo in Indonesia. Unocal, based in California, has assets in Thailand, Indonesia, Myanmar and Vietnam that account for more than half of its worldwide reserves and 60 percent of its global production.

Relations between Unocal, and Thailand, where it has been since 1962, are complicated. By providing three-fifths of Thailand's natural gas, Unocal single-handedly accounts for 30 percent of the country's overall energy supply.

If the China National Offshore Oil Corporation (CNOOC), succeeds with its $18.5 billion bid it would instantly become a leading player in Southeast Asia's energy industry, part of a wider move by Chinese oil companies to snap up energy supplies around the world and reduce the nation's reliance on Western oil companies.

But so far, the prospect of such a deal has produced little public reaction. Many Southeast Asian officials and analysts say they feel protected by long-term contracts that lock in Unocal's existing sales agreements for up to 30 years.

"Nothing's going to change in terms of business dynamics in the Gulf of Thailand," said Kitti Nathisuwan, energy analyst at Macquarie Securities in Bangkok. Unocal's gas is all sold to Thailand's state-controlled oil company PTT, which controls access to the pipelines carrying it from the Gulf of Thailand, he said.

Yet some analysts said they were concerned about CNOOC's long-term role. While Unocal's existing production may be contractually committed, Unocal is sitting on vast untapped reserves.

Unlike the American and European companies that have dominated Asian exploration and production, CNOOC's primary focus is providing for China's energy needs.

That has led some analysts to express concern that CNOOC might not prove to be the best broker for its oil and gas, either diverting supplies to China that are needed closer to home or selling them to China too cheaply.

Unocal's history in Southeast Asia highlights a pattern: putting profits ahead of politics has put Unocal in hot water. Like oil companies elsewhere, it has made friends with unpopular regimes and survived their downfalls. It invested in the Philippines under President Ferdinand V. Marcos and stayed when he was overthrown in 1986. Likewise, it came to Indonesia as Suharto was taking power after an abortive Communist uprising and it increased its investments there as riots brought him down in 1998.

In 1990, as it struggled under $6 billion in debt accumulated fending off a hostile raid by T. Boone Pickens and fought higher emissions standards for its California refineries, Unocal said that for the first time it would spend more on exploration overseas than in the United States. Among other destinations, Unocal went to Myanmar, where it invested in a project with Total of France to pipe gas from offshore across rebel-held territory into Thailand. Unocal stayed in Myanmar even after the Clinton administration imposed sanctions in 1997, forbidding further investments. Unocal still holds a 28 percent stake in the project.

This year, Unocal settled lawsuits filed in state and federal courts on behalf of villagers in Myanmar contending that as a minority shareholder, Unocal bore responsibility for military abuses committed during construction of the pipeline. Unocal maintains that it did nothing wrong and argues that to the contrary, its involvement in Myanmar has raised living conditions, providing better health care and more schools.

It is unclear what role CNOOC would play in Unocal's stead. China is a leading supplier of arms to Myanmar's junta. Critics of Unocal's investment there said it helped finance such arms purchases, while analysts said the project helped offset Myanmar's growing dependence on China for hard currency.

It is also unclear how Vietnam would respond to a CNOOC takeover of Unocal, which has two concessions to develop gas off Vietnam's southwest coast. China invaded Vietnam in 1979 and Vietnam still considers China a political and economic threat.

CNOOC has a clearer strategic interest, however, in Indonesia, where it has been amassing assets. In 2002, it bought the Indonesian assets of the Spanish oil company Repsol for $585 million as well as a 12.5 percent stake in one of the country's largest natural gas projects, BP's Tangguh liquefied natural gas operation, a stake it has since raised to roughly 17 percent. CNOOC has said it hopes to ship liquefied natural gas to China from another plant, Bontang, where Unocal's gas goes now.

In 2002, Tangguh won a contract to supply liquefied natural gas to a terminal being built in Fujian, which is controlled by CNOOC. But analysts said having CNOOC on both sides of the deal set a poor precedent for its future in Indonesia's oil and gas.

"The price was very low, very cheap," said the head of the Center for Petroleum and Energy Economics Studies in Indonesia, Kurtubi, who like many Indonesians uses only one name. "In the future, our L.N.G. will probably be sold to China at a very low price."

In Thailand, which has long been a staunch ally of the United States, a close kinship with China appears to have mitigated the kind of mistrust big Chinese investments are attracting in the United States.

"I think in Thailand we have such a close relationship with both the United States and China," said Pitak Intrawitayanunt, a former deputy prime minister who now runs a foundation for community development projects in Bangkok. "So we don't have any really serious concern on this matter one way or another." (*)