Chinese Firm Weighs Bid for Unocal

The disclosure by CNOOC Ltd., a division of state-owned China National Offshore Oil Corp., marked the first time that the Chinese entity had confirmed its interest in the exploration and production company.

CNOOC reportedly had been among the companies that had mulled over a bid for Unocal this spring, before Unocal and San Ramon, Calif.-based Chevron reached their deal April 4. Chevron agreed to pay $62 a share in cash and stock for Unocal.

In a filing with the Securities and Exchange Commission, CNOOC said it was "continuing to examine its options with respect to Unocal," which might "include a possible offer."

But CNOOC said no decision had been made. Such an offer would by far be the largest acquisition ever attempted by a Chinese company.

Chevron spokesman Don Campbell said "it's inappropriate for us to comment on the possible actions of others." But, he said, "we believe our offer, accepted by the Unocal board, is attractive and has a high degree of certainty as to completion."

Asked whether Chevron would make a counter-bid to any CNOOC offer, he declined to comment. Unocal spokesman Barry Lane also had no comment.

Investors reacted cautiously to CNOOC's statement. Unocal's stock rose 61 cents, or 1.1%, to $58.10 a share, while Chevron slipped 7 cents to $54.78. CNOOC's American depositary receipts, which are similar to shares of stock for U.S. trading, fell 31 cents to $55.46 apiece.

Several of Unocal's major oil and natural gas projects are in the Asia Pacific region and the Gulf of Mexico, and about 66% of its sales come from foreign sites. Chevron also operates in those areas, and it bid for Unocal in part because it expects to save $325 million a year in operating efficiencies once the companies are joined.

But with China now the world's fastest-growing major economy and its demand for oil second only to the United States, CNOOC and the rest of China's oil industry are under pressure to find or acquire additional reserves.

Even so, some analysts said they doubted CNOOC would make an offer for Unocal because it faced several obstacles, including intense U.S. regulatory scrutiny and a likely bidding war with giant Chevron, which had sales of $155.3 billion in 2004. Acquiring Unocal would increase Chevron's oil and natural gas reserves by about 15%, to the equivalent of 13 billion barrels of oil.