House Says No to China Oil Deal
Voicing concern about national security and the U.S. economy, the House of Representatives passed two measures Thursday aimed at blocking the proposed takeover of El Segundo-based Unocal Corp. by a Chinese oil company.
In a strong bipartisan vote of 333 to 92, the House approved an amendment to a Treasury Department spending bill forbidding the administration from using federal funds to approve the bid by CNOOC Ltd., an arm of government-owned China National Offshore Oil Corp., to buy Unocal for $18.5 billion.
The Treasury Department reviews proposals for significant foreign investment in U.S. companies to ensure that national security isn’t damaged, a process that would involve use of federal funds. The review is conducted through the multi-agency Committee on Foreign Investment in the United States, which has seldom blocked foreign investments or mergers.
But more important than its specific terms, the amendment, sponsored by Rep. Carolyn C. Kilpatrick (D-Mich.), was a vehicle for expressing congressional displeasure at the proposal.
“Why do we want to sell our oil to a global economic competitor?” Kilpatrick said. “Americans deserve a thorough government evaluation of the implications of Unocal’s takeover by one of our chief economic competitors.”
Although the amendment was passed, it could be changed or removed when members of the House and the Senate meet to reconcile their versions of the legislation.
In a separate action, the House approved a resolution, in a late-night 398-15 vote, expressing the chamber’s concern that the proposed buyout “could threaten to impair the national security of the United States” and asking the president to initiate a review if the companies proceed.
“I believe it is imperative that the United States protect its access to Unocal’s energy resources in order to protect our economy and our national security,” said Rep. Richard W. Pombo (R-Tracy), who sponsored the resolution.
Opponents of the resolution argued that permitting the Chinese to buy Unocal was only fair, considering that China is one of the largest holders of U.S. debt. They also noted that Unocal supplies only about 1% of the country’s petroleum.
“This resolution basically missed the point,” said Rep. Earl Blumenauer (D-Ore.). “The problem we have now is ... we are as addicted to the Chinese loans, to their credit to us, as we are to Saudi oil.”
Unocal’s board is weighing competing offers from CNOOC and Chevron Corp. of San Ramon, Calif., which is in Pombo’s congressional district. CNOOC’s $18.5-billion, all-cash offer for Unocal is equal to $67 a share.
The value of Chevron’s cash-and-stock offer changes daily with the price of Chevron’s stock. Chevron’s shares closed Thursday at $55.92, down 84 cents, making its Unocal bid worth about $59.45 a share, or $16.2 billion. Unocal shares closed at $65.05, down 15 cents, and CNOOC’s U.S.-traded shares closed at $59.32, up 7 cents.
“Today’s resolution calls for what CNOOC has been suggesting all along, namely, a thorough review of the transaction,” said Mark Palmer, a U.S. representative for the Chinese company. “Despite the heated rhetoric, we firmly believe the [Treasury review] process will be fair, thorough and not influenced by either emotion or politics.”
The Chinese company has pledged to sell Unocal’s U.S.-produced oil and natural gas within the United States. Unocal owns substantial reserves in Asia, and the Chinese government is eager to find long-term sources of fuel for its growing economy.
Chevron spokesman Don Campbell said the company appreciated “the open and vigorous debate” in Congress, and he repeated the company’s contention that the CNOOC offer was being unfairly subsidized through cheap financing from Chinese-government-related entities.
Also Thursday, Unocal said high energy prices boosted its second-quarter profit more than 20% above analyst expectations. Unocal said it would report after-tax second-quarter income, excluding some items, of $1.65 to $1.70 a share Aug. 1, exceeding the average estimate of $1.36 a share from analysts surveyed by Thomson First Call.
Times staff writer Elizabeth Douglass contributed to this report.