In Unocal bid, China leaps ahead of India

As the upstart CNOOC tries to get hold of Unocal, it is sending alarm bells ringing in Washington. If it succeeds, it will be the first time a Chinese oil company has beaten an American major in acquiring a major oil asset anywhere in the world, let alone in the US.

CNOOC’s bold move could also intensify India’s competition with China to control energy resources in Asia. An insatiable appetite for energy resources is driving India and China into a frenetic hunt for oil assets around the world.

In early April, the US giant Chevron, the fifth biggest oil company in the world, announced it is buying Unocal for US$ 17 billion. Its bid turned out to be better than that of CNOOC. But latest reports here indicate that CNOOC has not given up and is upping the ante in its quest for Unocal.

While this has boosted the stock prices of Unocal, analysts in Washington are raising eyebrows at the potential implications of a Chinese company controlling an important American energy corporation.

Chinese companies in the past have brought American ones. Most notable has been Lenovo’s acquisition of IBM Personal Computer business. But that will be nothing compared to China’s control over Unocal.

If CNOOC fends off Chevron, it could be a defining moment for the world and presage the decline of Anglo-American control over the international oil markets.

Ambitious bids by Chinese companies are changing the historical patterns of resource ownership around the world — from Soybeans in Brazil to iron ore in Australia not to mention natural gas in Iran.

It remains to be seen, however, whether the US government will let CNOOC acquire Chevron. For Washington there is more at stake here than oil companies changing hands.

After all oil and flag always went hand in hand for the US. That also holds true for China and India.

Unocal is a familiar name in the subcontinent, thanks to its efforts in building a pipeline through Taliban’s Afghanistan during the 1990s and its enterprising search for oil in Myanmar and Bangladesh. It also owns oil and gas resources in Thailand, Vietnam, Indonesia and Central Asia.

India closely monitors the growing Chinese interest in oil resources around its neighbourhood. Among the recent Chinese moves has been the search for oil in the Arakan coast of Myanmar in the Bay of Bengal.

China’s purposeful energy security drive is not limited to purchasing equity oil and international energy companies. It involves participation in the development of maritime infrastructure — for example new ports and oil terminals in Pakistan, Myanmar and Sri Lanka.

While India’s competition with China on energy security is indeed a reality, there is room for cooperation between the two countries in the international oil markets.