- The Washington Times - Friday, July 1, 2005

China National Offshore Oil Corp. said yesterday it had taken the formal first step to convince the U.S. government that its takeover bid for U.S. oil company Unocal Corp. does not pose a national security threat.

The state-owned Chinese oil company filed notice with a high-level U.S. committee requesting a review of its proposed $18.5 billion cash offer for Unocal, which is mulling a competing $16.6 billion offer from Chevron Corp.

CNOOC filed notice with the Committee on Foreign Investment in the United States (CFIUS). Under the committee’s regulations, Unocal will have seven days to respond to its questions about the proposed purchase, the company said.

CNOOC said it was “confident” it would obtain clearance from the committee once the review is under way, and looked forward to explaining the deal in more detail.

“We welcome this opportunity and believe that once all the facts are known and the commercial purpose and terms of the transaction are fully understood, many initial misimpressions will be corrected, and many doubts and questions will be favorably resolved,” the company said.

The CFIUS was created to monitor foreign investment activity in the United States with an eye toward protecting national security.

Led by Treasury Secretary John W. Snow, the committee’s 12 members include the secretaries of state, defense, and commerce, the attorney general, the director of the Office of Management and Budget, the U.S. trade representative, and the chairman of the Council of Economic Advisers, according a Treasury Department Web site.

CNOOC made an unsolicited offer to acquire Unocal in late June, topping an earlier cash-and-stock offer from Chevron. However, CNOOC’s proposal has faced intense scrutiny from lawmakers over national security and other concerns.

On Thursday, the House said a state-owned Chinese company taking over an American oil company could threaten national security and asked the president for an immediate and thorough review if CNOOC purchases Unocal.

The resolution, approved 398-15, said oil and gas are “strategic assets” and that a Chinese state-run firm’s takeover “would threaten to impair the national security of the United States.”

CNOOC, however, said it still had confidence that its bid will receive a fair hearing.

“When the CNOOC board authorized the offer for Unocal, it knew that the transaction would create great interest and even some concern,” it said.

“The resolution calls for what CNOOC has been asking for all along — a thorough review of the transaction.

“Despite the heated rhetoric, we firmly believe that the CFIUS process will be fair, thorough and not influenced by either emotion or politics.”

The House measure “looks like a knee-jerk reaction,” said Pieter Bruinstroop a Melbourne, Australia, broker at Ord Minnett Ltd. “The U.S. is also trying to figure out why the company wants the assets so much. It’s going to be a long, drawn-out process.”

Unocal shareholders are faced with either accepting Chevron’s offer, which already has government approval, or waiting for investigations that may take months in the hope of getting CNOOC’s cash.

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