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Senator Looks to Block China-Unocal Merger

A Democratic senator has launched a bill that would block the proposed acquisition of a major U.S. oil company by the Chinese government.

Sen. Byron Dorgan of North Dakota introduced the bill July 15 to outlaw China's CNOOC Ltd., which is 70 percent state-owned, from buying Unocal Corp.

"Unocal is located in the United States and has approximately 1.75 billion barrels of oil," Dorgan said in a statement. "It would be foolish, to say the least, to allow a foreign government, particularly one that remains committed to national one-party rule by the Communist Party, to own that much of such a strategic resource so vital to the U.S. economy and the national defense."

Dorgan's bill comes nearly two weeks after the U.S. House of Representatives overwhelmingly voted to block the Bush administration from approving CNOOC's proposed deal.

CNOOC, which is China's third-largest oil producer, made an $18.5 billion offer for Unocal June 22. The unsolicited bid sets the stage for a potential showdown with rival bidder Chevron Corp., which offered to buy the El Segundo, Calif.-based Unocal for $16.5 billion back in April.

Last month the Federal Trade Commission gave Chevron permission to go ahead with the planned acquisition. The agency signed off on the deal after Unocal agreed not to enforce a patent on reformulated gasoline that the FTC claimed could have given the company monopoly power in the technology market for low-emission gasoline and increased gas prices in California.

Chevron has since raised its offer for Unocal to $17 billion in light of CNOOC's continued interest in the company. Unocal accepted the sweetened deal but will continue to evaluate CNOOC's bid, which is still more than $1 billion higher than Chevron's, according to published reports.

Dorgan, however, hopes to quash any chance of a CNOOC-Unocal merger taking place. He argues that neither the federal government nor any U.S. corporation would be allowed to make a similar purchase in China.

"China should be barred from owning a U.S. oil company, at least until it allows American companies to purchase controlling interests in Chinese energy companies," Dorgan said. "What is good for the goose is good for the gander."

Chevron said on its Web site that its revised transaction is structured at 40 percent cash and 60 percent stock, providing an overall value of $63.01 per share of Unocal common stock

Unocal shareholders are expected to vote on the Chevron offer Aug. 10, according to the companies.