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Chinese Oil Company Offers $18.5 Billion for Unocal

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From the Drudge Report June 22 with a link to the New York Times, the China National Offshore Oil Corporation, a state run Chinese oil company has made an unsolicited bid for Unocal.

This is only the beginning. Billions of dollars flow to China as seemingly everything we buy these days is made there. They have to do something with the money.

Earlier this week, a consortium of investors led by the Haier Group, one of China’s biggest companies, made a bid to acquire the Maytag Corporation, the American appliance icon, for about $1.3 billion, surpassing an earlier bid made by a group of American investors. Last month, Lenovo, China’s largest computer maker competed its $1.75 billion to acquire I.B.M.’s legendary personal computer business, creating the world’s third-largest computer maker after Dell Computer and Hewlett-Packard.

This is reminiscent of the Japanese buying up properties all over the US in the 80’s with the trade surpluses they had. Later after the real estate bust they ended up selling many properties at a loss. It is hard to imagine Unocal going down in value though like say the Empire State Building did in a bad economic cycle.

CNOOC is interested in Unocal, once known for its 76 brand, less for its exploration and production in North America than its huge reserves in Asia. Twenty-seven percent of Unocal’s proved oil reserves and 73 percent of its proved natural gas reserves are located in Asia, according to Merrill Lynch.

Once can only wonder what they will do with the assets. Do they want to own retail oil distribution and refining here? Perhaps they will sell off the US domestic assets and divert the oil reserves in Asia for consumption in China. What could the effect be on US oil distribution and prices if one major player goes away and the reserves were no longer slated to be distributed here?

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