No Thanks, China, We'll Keep Our Oil

Unocal's board has rejected an offer from Chinese energy giant CNOOC in favor of a lower offer from Chevron:

U.S. oil producer Unocal Corp. endorsed a sweetened $17 billion takeover offer from Chevron Corp., preferring it to a higher bid from China's state-run CNOOC Ltd. <0883.hk>.

Chevron , the second-largest U.S. oil company, raised its stock and cash bid to $63.01 per share from roughly $60, turning up the heat in an international battle for energy assets as strong demand and tight supply hold crude oil prices near record levels.

The improved offer for Unocal, which has assets stretching from Myanmar to the Gulf of Mexico, was forced on Chevron by an all-cash, $67-a-share bid from CNOOC worth $18.5 billion.

"Our increased offer has been driven by competitive circumstances," said Chevron Chairman and Chief Executive Officer David O'Reilly.

Unocal's board has favored Chevron's bid partly due to concern U.S. regulators might reject the CNOOC deal based on national security grounds or the deal may be stuck in long review process. It recommended shareholders accept the sweetened offer at a shareholders' meeting already scheduled for Aug. 10.

Now it's up to the shareholders who will hopefully follow the board's lead. If not, I don't see how the Federal government could allow this takeover by a Chinese corporation without seriously endangering national security.

Chinese demand for oil is surging and is part of the reason prices have shot up. If they were to control Unocal's assets, they could very easily squeeze the U.S. economy even harder whenever they wanted.

I doubt if the idiotic comments the other day from one of the Chinese generals did their bid any good either. He said in regards to Taiwan (h/t Okie):

“If the Americans are determined to interfere … we will be determined to respond,” said Gen. Zhu, head of China’s National Defense University. “We Chinese will prepare ourselves for the destruction of all of the cities east of Xian [in central China]. Of course the Americans will have to be prepared that hundreds … of cities will be destroyed by the Chinese.”

I'm sure those comments did not give U.S. regulators a warm and fuzzy feeling, and certainly would have made approval of the Chinese deal that much harder. Now we'll see how China counters the Chevron offer and if that makes any difference.