Cnooc drops $18.5 bn Unocal bid

Cnooc made its all-cash bid on June 22, topping the early-April cash-and-stock offer from Chevron, but it faced an uphill road in the United States from the start. Cnooc’s parent company is controlled by the Chinese government.

Cnooc Chairman Fu Chengyu, the driving force behind the bid, in the end listened to his political advisers, who had warned of the high political hurdles the transaction faced.

‘‘Cnooc has given active consideration to further improving the terms of its offer, and would have done so but for the political environment in the US,’’ the company said in a statement.

It called the political response to its offer ‘‘regrettable and unjustified.’’

Some members of the US Congress sought to block the deal almost from the start. Last week a congressional conference committee added a provision to a broad energy Bill that would have delayed the necessary government review of Cnooc’s offer by months.

In public filings related to the Chevron offer, Unocal made clear that it had been willing to accept the Cnooc bid under certain conditions — conditions Cnooc ultimately chose not to meet.

Cnooc shares rose to a new record high in Hong Kong trading on Tuesday before the company made the expected decision to withdraw its bid, gaining 2.8 per cent to HK$5.50.

‘‘This is good for Cnooc. It clears away the uncertainty risks,’’ said John Koh, fund manager at Daiwa Asset Management, which holds Cnooc shares.

Unocal shareholders are to vote on the Chevron offer on August 10. If they approve the deal, it is expected to close as soon as that afternoon.

Cnooc’s all-cash bid for Unocal in late June was the largest takeover bid ever attempted by a Chinese company. It came just two months after Chevron and Unocal had already agreed to a merger, sparking a Wall Street-style takeover battle that forced Chevron to sweeten its bid about two weeks ago.

People familiar with Cnooc’s decision to pull out of the bidding say the Chinese company was reluctant to increase its own initial bid because Washington seemed unlikely to approve the deal and had even adopted legislation that would slow the approval process. Unocal’s board of directors had also done little to favour Cnooc.

The monthlong battle for Unocal’s assets came to symbolise the growing trade and political tensions between China, the rising power in the East, and the US, the premier power in the West, but a nation whose economic and political standings are now being challenged.

The two countries lead the world in oil consumption. But China’s much-smaller economy is growing at a rapid clip, and so the country’s state-owned oil and energy companies have been scouring the globe in recent years for new sources of energy.

Washington politicians opposed Cnooc’s bid almost from the start, arguing that it was subsidised by the Chinese government and that the Chinese government could be seeking to take control of some of America’s strategic oil assets.

One Chinese analyst had rough words for the US, calling Cnooc’s decision a tragedy. ‘‘The way the US government has treated Cnooc and politicised the deal will largely frustrate Chinese companies,’’ said Han Xiaoping, the chief information officer at Falcon Power Ltd, an energy consulting firm based in Beijing.