Cnooc Unocal Case

International Management
MGMT-328-006 (Spring 2011)
Instructor: Manuel Montoya
Name: Carla Taddei

CNOOC Unocal Case

On this paper I will talk about the case studied in class about the bid byCNOOC to acquire the U.S energy company Unocal for $18.5 billion raised many issues with U.S policymarkers, about some reasons why U.S did not accept the proposal and some possible consequences ofthat decision.
Unocal owns reserves of oil and gas in Asia, was originally wooed by Chevron, which offered 16.5 billion dollars by the company. The fact that a Chinese company is prepared to offer morepowerful than a U.S. firm to control a minor oil company based in the U.S. is immensely significant in purely economic terms.
The bid was abandoned by the Chinese because of fierce opposition toU.S. policy. The fact is that if the transaction would have been consummated, it would have represented the largest ever by a Chinese company in the U.S. But the bid triggered intense political debateand resistance in Washington because of ties between the Chinese government, CNOOC (belongs to the state 70%) and because the principal commodity involved, oil, is considered vital to the U.S. economyand not as abundant as was thought at first. Fearing that China might gain control over valuable supplies of oil and gas that would someday be needed for the U.S. or Asian allies, conservativepoliticians sought to block the acquisition of Unocal by the CNOOC transforming the subject matter of national security. "This is a matter of national security," said former CIA director R. James Woolseytestified before the Senate Defense Committee last July. China is pursuing a national strategy of domination of energy markets and strategic dominance of the western Pacific, a strategy, he argued, whichcould be enhanced so very important to the acquisition of Unocal by the CNOOC. Seen from this perspective, CNOOC's bid was considered a threat to U.S. security interests and thus could have been...