By Reporter
NBC News
updated 6/27/2005 4:12:31 PM ET 2005-06-27T20:12:31

China brushed off American concerns that the China National Offshore Oil Company’s bid for the 9th largest U.S. oil company, Unocal, is politically motivated and will threaten the U.S. energy security.

Even if the bid is successful, it’s not clear just how much of the Unocal’s oil and gas assets would ultimately end up in Chinese hands. To finance the deal, CNOOC would have to sell off large chunks of Unocal’s assets, according to Bear Stearns oil analyst Adam Clarke.

"Substantially all of the oil and gas produced by Unocal in the U.S. will continue to be sold in the U.S.," said Fu Chengyu, the chairman of China National Offshore Oil Company, known as CNOOC, in a statement. Fu also re-emphasized that his company is committed to retain the jobs of Unocal's employees.

The Chinese Foreign Ministry Spokesman Liu Jianchao dismissed speculations that the state-controlled firm's move is politically motivated. "This is a company activity, we hope that trade between the U.S. and China can be healthy and not disturbed by other influences," said Liu. "If other people are trying to interfere with this, I don't know the reason why they should, so we hope all such projects can proceed smoothly.”

Security concerns
The unsolicited $18.5 billion offer, which could be the biggest overseas acquisition by a Chinese company, was a sharp reminder of the rapid pace of Chinese economic expansion, stirring up worries that it will pose a threat to the U.S. security.

Even before CNOOC announced the deal, Rep Richard Pombo (R-California) and Duncan Hunter (R-California) warned President Bush that the acquisition would come with disastrous consequences for national and economic security.

"The deal doesn't pose any threat to the security of the United States," said Zongwei Xiao, CNOOC's manager of investor relations. "The United States is a democratic society. Everyone has the right to express whatever they want.”

Agressive step in series
The bid for Unocal by CNOOC, China’s third largest oil producer, is the most aggressive step in a slew of overseas merger and acquisition attempts since its initial public offering in 2001. Last year, it collaborated with ChevronTexco, its rival in the bid for Unocal, to participate in the Gorgon gas project in Australia. In 2002, it also spent $215 million for a stake in a liquefied natural gas project in Indonesia.

"The rationale of the company's behavior is really quite simple. It's after the assets, Unocal's assets in southeast Asia," said Zha Daojiong, the Director of International Energy Institute of the Renmin University of China.

China, the second biggest energy consumer in the world, will top the United States and become the biggest consumer in 2030, according to a report by the International Energy Agency.

Zha also pointed out that to restrain Chinese companies from acquiring oversea resources is not the solution to the future of heightened energy consumption level in China in an age of energy shortage.

"The rest of the world should work together to manage the efficiency of oil consumption in China," said Zha.

Joy Jia is a researcher in NBC News Beijing Bureau.

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