CNOOC weighs bid for Unocal

Chinese oil firm CNOOC, said on Tuesday that it was considering making a competing bid to Chevron's $16.4 billion offer for Unocal as soaring energy demand increases pressure on China to pursue oil supplies.

"The company announces that it is continuing to examine its options with respect to Unocal," CNOOC said in a statement to the Hong Kong Stock Exchange. "These options include a possible offer by the company for Unocal, but no decision has been made in this respect."

International herald Tribune reported energy industry analysts in Beijing as saying that divisions between CNOOC's foreign nonexecutive directors and its Chinese management have delayed any firm decision to bid for Unocal, which has extensive oil and natural gas reserves in Indonesia, Bangladesh, Thailand and Myanmar.

Energy consumption has been soaring in China, the world's fastest growing economy and now the second-biggest consumer of oil, behind the United States. To increase energy security, the government has urged CNOOC and two other major oil companies, PetroChina and China Petroleum & Chemical, to seek investments in offshore oil and gas reserves.

"We think China will rely on imports for the next 20 years, especially crude oil, and the government is also trying to increase the amount of natural gas in the consumption mix," said Ma Shang, a an energy analyst for Fitch Ratings. A bid for Unocal is "a good chance for CNOOC to get a large amount of reserves," Ma said.

China's demand for petroleum has far outstripped domestic production, and the country last year imported 123 million metric tons of oil, according to Chinese media. These imports accounted for more than half of consumption.

If CNOOC bids for Unocal, it would need to top Chevron's April 4 cash-and-stock offer for the El Segundo, California, company, which last year had earnings of $1.2 billion on revenue of $8.2 billion.

A successful bid would also need to account for a $500 million fee that Unocal agreed to pay Chevron if the offer is terminated in favor of another deal.

Energy industry analysts said the size of the potential deal had opened up the divisions on the board of CNOOC. The government owns 90 percent of CNOOC, China's third-biggest oil producer.(*)