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To: Skywatcher who wrote (24523)	6/23/2005 11:13:49 AM
From: Bucky Katt	Respond to of 48463

They need to control more energy assets> Earlier this month, the chief of China's largest oil company said China would increase its oil consumption by 3% a year every year until 2020. He may have been low-balling it: Last year alone, China's imports of crude oil rose by 34.8%, making it the second-largest importer in the world after the U.S., according to an AFX News report. China's increasing thirst for oil has been manifest as Chinese companies have been spanning the globe in search of a more stable supply. This new demand from China, as well as India, is the key to predictions by outlier analysts, recently joined by Goldman Sachs (nyse: GS - news - people ), that $60 a barrel oil is just the beginning of a not-so-long march to $150 a barrel oil (see: "The Coming Oil Crisis"). It is against this backdrop that China National Offshore Oil, China's third-largest oil company, made an unsolicited $18.5 billion cash bid for Unocal (nyse: UCP - news - people ) yesterday, shaking up Chevron's (nyse: CVX - news - people ) $16.5 billion bid for the U.S. company. Though the CNOOC bid is the largest takeover bid ever made by a Chinese company, it is hardly China's first bid for oil assets. The difference is that this oil buying effort comes publicly and in one fell swoop (see: "Getting With The Drill"). "It basically indicates desperation for oil on the part of the Chinese that they'd be willing to countenance congressional disapprobation," says Stephen Leeb, president of Leeb Capital Management and author of The Oil Factor. "The know that it will not be viewed favorably by many in our government, yet they are willing to make a bid." While China has been a big buyer of U.S Treasurys for some time, its use of dollars earned through its trade surplus with the U.S. to buy one of the world's 400 largest companies, successful or not, is sure to ruffle some feathers in Washington, D.C. CNOOC has a publicly traded arm, but is a unit of a state-owned parent. It has a market capitalization of just under $22 billion, compared with Unocal's $17.6 billion. Chevron has a market value of $122 billion. It reports just 2,500 employees, compared to 6,600 for Unocal. While there has been a hue and cry about Chinese exports in recent years, especially in textiles, the next menace--real or perceived--from the middle kingdom could come when it puts its export earnings to work buying U.S. assets, as happened with Japan in the 1980s. Two congressmen from California have asked President Bush, following earlier deal rumors, to consider the national security implications of the deal. Energy Secretary Samuel Bodman said he would urge the Committee for Foreign Investment in the U.S., an interagency panel, to do just that, though any security concerns would seem to pale against the fact that the U.S. now imports about 60% of its oil (see: "Oil Crises Now and Then"). As it happened, much of the Japanese buying was at the top of the market and came before a period of stagnation for the Japanese economy. Many press reports call CNOOC's bid hostile, but it insists its intentions are friendly. Unocal's board said in a statement that its recommendation of a merger with Chevron remains in effect, though it would evaluate the CNOOC proposal. CNOOC had publicly mulled a bid for El Segundo, Calif.-based Unocal earlier this year, but backed away. If its deal is consummated, CNOOC also says the combined company would have a leading position in the Asian energy market, and that the deal would more than double CNOOC oil and gas production and increase its reserves by nearly 80%, to approximately 4 billion barrels of oil equivalent. Already, about 70% of Unocal's current proved oil and gas reserves are in Asia and the Caspian region, CNOOC says. CNOOC is already involved in many international partnerships, including that with BP, the U.K. giant, especially in natural gas. But if it buys a company founded in 1890, whose history pre-dates the appearance of the automobile in California--that would be something new. forbes.com