Although no public announcement has ever been issued by China National Offshore Oil Corp. (CNOOC), two Republican congressmen from California are calling on the Bush administration to review a possible counterbid if the Chinese major attempts to acquire Unocal Corp.

Chevron and Unocal, both headquartered in California, agreed to a $16.7 billion merger in April. It already has been approved by the Federal Trade Commission, and awaits shareholder approval (see Daily GPI, June 13).

Although CNOOC has indicated in press reports that it could make a counterbid to buy Unocal, the company has yet to issue any statements about its plans. If CNOOC were to make a counteroffer, it would have to pay a $500 million breakup fee to Chevron, under Unocal’s agreement.

Concerned about China’s increased need for energy sources, and state-owned CNOOC’s ability to use the country’s treasury to fund acquisitions, Reps. Richard Pombo and Duncan Hunter wrote a letter to the president last week which stated, “The United States increasingly needs to view meeting its energy requirements within the context of our foreign policy, national security and economic security agenda. This is especially the case with China.”

According to the Wall Street Journal, Pombo and Hunter said, “We fear that American companies will find it increasingly difficult to compete against China’s state-owned and/or controlled energy companies, given their mandates to supply China’s ever growing demand for energy…A government-owned company like CNOOC has access to the Treasury of the Chinese government, something no company operating in the free market has.”

The congressmen are said to want Bush to exercise his U.S. authority under a 1988 federal law that allows a review by the Committee on Foreign Investments in the United States, which is chaired by John Snow, secretary of the Treasury. Once a review is completed, the president could consider blocking CNOOC from buying Unocal if a counterbid is issued, according to the congressmen.

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