US Congressmen want probe of Unocal bid: Report

Two U.S. congressmen have asked the Bush administration to review and possibly block any effort by China's CNOOC Ltd. to acquire Unocal Corp., The Wall Street Journal reported on Sunday.

The move comes amid reports that CNOOC Ltd., China's third largest oil group, was set to announce a counter-offer to trump Chevron Corp.'s US$16-billion bid for Unocal.

Richard Pombo and Duncan Hunter, Republican congressmen from California, urged President Bush to exercise his authority under a 1988 federal law to begin a review by the Committee on Foreign Investments in the U.S., an interagency panel chaired by Treasury Secretary John Snow, the Journal said.

After the review, Bush could block the deal, although such a move would be highly unusual, the Journal report said.

A CNOOC spokesman in Beijing said he had no comment on the report. He reiterated CNOOC's statement on June 7 that the company was still considering buying Unocal.

Chevron won a close race against several oil companies, including CNOOC, to sign an agreement in April to buy Unocal, which has an attractive portfolio of assets in Asia, for $16.4 billion. Chevron would also take over $1.6 billion in debt.

The deal carries a $500 million break-up fee, meaning any new suitor would have to pay Chevron $500 million.

Although CNOOC has kept its options open, analysts have said a counter-bid by the company is unlikely given the break-up fee and sweetened price tag necessary to trump Chevron's deal for a company on its home turf.

Daiwa Institute of Research on Monday downgraded shares in CNOOC to "outperform" from "buy" on concerns it would bid for Unocal, and lowered its six-month target on CNOOC's share price to HK$5.05 from HK$5.70.

CNOOC shares had lost 4.6 percent in the past three months, far underperforming a nearly 9 percent gain in shares of PetroChina, the country's largest oil producer. CNOOC shares were up 1.2 percent at HK$4.225 by 0734 GMT on Monday after hitting a day high of HK$4.275.

"The main concern of investors is whether CNOOC's management would give higher priority to national interests rather than minority shareholders," Daiwa analyst Rachel Tsang said.

If CNOOC bid a total of $18.54 billion for Unocal, it would value Unocal's proven reserves at the end of 2004 at $10.57 per barrel of oil equivalent (boe), 9 percent higher than CNOOC's enterprise value/boe based on CNOOC's share price last Friday.

Merrill Lynch earlier this month also downgraded CNOOC shares to "neutral" from "buy" on similar concerns. Any bid could not come at a worse time given high oil prices and the state of Sino-U.S. relations, it said.

Analysts have said that a counter-bid by CNOOC would also face U.S. regulatory hurdles given that it is a state-owned Chinese company. It would also be difficult for CNOOC to sell unwanted Unocal assets in North America.

CNOOC is interested in acquiring Unocal because its oil and natural gas assets in Asia fit CNOOC's aspirations to become a major regional liquefied natural gas (LNG) player. (*)