SHANGHAI — The Chinese oil company battling to buy Unocal Corp. abandoned its effort Tuesday because of what it termed "regrettable and unjustified" U.S. political opposition, ending a showdown that spotlighted American concerns about energy security.
The decision by CNOOC Ltd., largely owned by the Chinese government, to drop its $18.5-billion bid for Unocal clears the way for Chevron Corp. to acquire the El Segundo-based company in a deal currently valued at $17.5 billion.
It also cuts short the biggest takeover attempt made by a Chinese company for a foreign firm. CNOOC's play for the U.S.' eighth-largest energy company represented China's aggressive global push to secure energy resources.
But the furor that it generated in Congress underscored the increasing economic and political competitiveness between the United States and a rapidly rising China. And even though analysts said CNOOC's failed bid could give other acquisition-minded Chinese companies pause as they look to build their brands and compete on a global scale, it's not likely to end their interest in buying U.S. companies.
"This is a wake-up call that China is sitting on a big pile of dollars, and they've got to spend it somewhere," said Richard C. Bush, a former U.S. intelligence official now at the Brookings Institution. "It seems clear they want some of them to occur here."
CNOOC's withdrawal from the contest appeared increasingly likely in recent days as American political objections mounted and Unocal's board of directors swung its support behind Chevron's competing bid -- which will be voted on by Unocal shareholders a week from today.
CNOOC's management in Beijing, led by the Western-educated oilman Fu Chengyu, considered sweetening its bid for Unocal but concluded that it wasn't worth it, given the obstacles imposed by Washington. An energy bill passed by Congress last week would have delayed a CNOOC acquisition of Unocal by at least 120 days. An influential shareholder advisory firm estimated that such delays would reduce the value of CNOOC's offer by at least 5%.
The hostile political climate created "a level of uncertainty that presents an unacceptable risk to our ability to secure this transaction," CNOOC said in a statement. Fu wasn't available for comment, but a CNOOC spokesman left no doubt about the company's bitterness.
"Are we pissed off? Yes," said Tim Payne, a CNOOC spokesman in Hong Kong.
