CNOOC withdraws Unocal bid

SAN FRANCISCO — By the time it was resolved Tuesday, the battle to buy Unocal Corp. had become more than a takeover tussle pitting Chevron Corp., the second largest U.S. oil company, against CNOOC Ltd., China’s third largest oil concern.

The showdown also underscored the stewing tensions between the United States and China, a pair of international powers, countries whose fortunes are becoming increasingly intertwined despite their vast cultural, economic and governmental differences.

San Ramon-based Chevron finally prevailed with a big helping hand from U.S. lawmakers, whose apprehensions about a U.S. oil company falling into the hands of a company controlled by China’s Communist government prompted Hong Kong-based CNOOC to withdraw its all-cash bid of $18.4 billion.

But it could turn into a Pyrrhic victory for Chevron — and perhaps even the United States — if China decides to use its increasing financial clout to retaliate for the political bashing of CNOOC.

“China is probably already thinking, `We don’t know how and we don’t know when, but we will get (Chevron) for this,”’ said Oppenheimer & Co. analyst Fadel Gheit. “This will go down in the history books in China.”

For now, CNOOC’s retreat clears the way for Chevron Corp. to complete its acquisition of Unocal next week, even though its cash-and-stock offer is currently worth $700 million less.

Chevron had several factors working in its favor — regulatory clearance, the support of Unocal’s board and the political uproar over CNOOC’s bid.

CNOOC raised hackles in Congress because the company is part of the China National Offshore Oil Corp., which is 70 percent owned by China’s government. That connection raised concerns about whether a CNOOC takeover would threaten the United States’ economic and national security interests. Several lawmakers also criticized the government-backed financing that would have help CNOOC pay for its bid.

The political misgivings virtually ensured CNOOC’s bid would have to undergo a rigorous — and possibly tempestuous — review that would have prevented Unocal from being sold for at least another six to nine months, with no guarantee that the deal would ever be completed.

Chevron spokesman Don Campbell declined to comment on CNOOC’s remarks, saying the company is focused on assuring a smooth transition after its Unocal acquisition is complete.