The first thing I thought when I heard about the Chinese government’s effort to acquire Unocal was that British Petroleum held the role of business terra firma on the American soil of Alaska for a long time before getting out in 1989. They have pretty much dominated the supply there, though their ability to distribute is controlled by the country’s possession of the Alaskan pipelne and the land.
My second thought was about America’s strong lobbying efforts to open up the oil industry in other countries — most especially Russia — so the United States can buy companies or oil fields there. A 2004 speech from Ali Moshiri, managing director, ChevronTexaco Latin America (while shockingly absent any talk of conservation), brings out a plan for pushing into other countries, and some of the difficulties his company has had doing so.
With those two thoughts leading this week’s reading research project I sought more information, gathering together what I’ve heard, read and seen just over the last couple of days.
Even after reading that the country’s ninth-biggest oil company, Unocal accounts for less than 6 percent of American production and that its major asset is natural gas and oil just off-shore of Indonesia, my squirrelly gut reaction is the same. The Unocal purchase by China National Offshore Oil Corp., the third largest oil company in China (and 70-percent Chines-government owned), is part of a strategy that “Big Red” has been pursing in recent months and years to shore up its own supply.
Chevron had been the favorite in the rush to buy Unocal but why is it up for sale anyway? Isn’t that a question worth asking as well? I could not find the answer online.
According to a 2003 Unocal Prospectus (PDF) seven of nine members of the Unocal voting Board of Directors are Malaysian.
Timothy Ling was Unocal chairman from 2002 to 2004 when he died of a heart attack following a workout.
Can it be a coincidence that this great push comes at a time when the President of China is, himself, an oilman, of sorts. President Hu Jintao holds a master’s degree in petroleum engineering from the University of Southern California. (Source)
Better hybrid than Red
My gut reaction here is, nice try China, but no thanks.
And Congress members from both side of the aisle are about ready to act based on that same forceful blow to the solar plexus. National security is the big buzz and the deal can be stopped dead on these grounds by the Committee on Foreign Investments in the United States, a multi-agency board.
“It does raise questions about how much of the country we are willing to sell to a Communist country that we might be fighting someday,” said Michael O’Hanlon, an international military specialist at the Brookings Institution. But he added, “I’d be surprised if we really fall on our sword to prevent the sale.”
An undoubtedly big factor that isn’t part of the discussion is that Unocal remains the main player in constructing a natural gas pipeline across Afghanistan. Progress stalled on that in 1998 less than a year after Central Asia Gas Pipeline (CentGas) was formed (Source: Unocal) when Unocal pulled out of the deal. In 1997, Unocal had been in talks with the Taliban.
Last year’s China purchase of IBM’s personal computing division was not under the same scrutiny.
But, no less a paper than the Houston Chronicle – smack dab in the middle of oil country – writes an admonishing headline on an editorial about the $18.5 billion hostile bid: Irrational protectionism fuels fear over China oil bid with a subhead: Unocal takeover would change little in oil markets
Washington Post op-ed writer Sebastian Mallaby argues here that the United States would actually realize a net benefit from the sale. He finds the comparison’s to Japan’s 80s spending spree informative and worth revisiting.
Some people fear the economic threat from China. Others fret about expensive oil. With the skill of an accomplished arsonist, China has now poured gas on the flames of these separate anxieties, turning two medium-size fires into a single inferno
Writer Fred Cederholm points to the irony, especially this year, that much of America’s independence is celebrated with fireworks manufactured in China.
Of course, for a long time the United States has been not independent but entirely dependent on foreign oil to function. (Canada – 1.68 million barrels; Saudi Arabia- 1.49 million barrels; Venezuela- 1.46 million barrels; Mexico- 1.35 million barrels. Others combined: 7 million barrels). Source. A barrel equals 42 gallons of crude.
The furor over America’s exaggerated consumption (in not only transportation but the manufacture of plastics and aiding the manufacture of a whole warehouse full of other items) is already here and energetic. It will only get hotter. Much of the technology already exists, but these same oil companies and car companies really aren’t eager to change the status quo.
But China is eager for change – and in a spending mood.
Mallaby seems to have decided that $18.5 billion is no big deal: “If you look for a convincing reason to block China’s bid for Unocal, you’re not going to find one.”
Nevertheless, people are going to keep looking.
AP / Business Week article: China oil company bids $18.5B for Unocal.
OF INTEREST – AP / Forbes: Chinese Oilman Is Leading Beijing’s Unocal Bid.
– Philip Bowring of the New York Times‘ s owned International Herald Tribune gives a good insight into the finances of the deal: Beyond China’s Oil Bid, A Greater Danger.
- The myth of untapped oil reserves. Asia Times: The Saudi Oil Bombshell
- Energy Bulletin : A letter from oil exploration insider
By TEMPLE A. STARK, Casa Grande, Arizona RSS FEED