Implications of CNOOC's takeover of UNOCAL

Farmer Brown SG

Lets say the deal pushes through..

What are its implications?

niehur SG

China has access to more oil and gas. Being a state-owned company, they don't have to be profitable to continue operating.

This way, China can relax on their imports of oil. Then they can hold the RMB exchange pecked 8.26rmb:1USD.

The cost of their exports will be artificially low and foreign manufacturers will be asphyxiated to close-down.

They can increase their foreign exchange reserve by selling the oil/gas reserves Unocal.

China can gain access to the technology of Unocal. However this last point is a bit lame coz I believe good technology should be shared as long as it doesn't feed alternatives for destruction.

There may be more implications that I am still inexperienced to know...

vito_corleone SG

oil is a very valuable asset, why do u think the US sends soldiers to fight over it? if china gains control over uncoal they will control a pretty good share of the US’s oil assets, which ain’t very good security wise.

38 SG

Not really, Unocal only controls less than 1 % of US Oil sector. the CNOOC's action more a symptomatic movement.

Don't forget at the same time, the ExxonMobil ground-broke a massive 3.5 Billion USD refinery in Fujian Province, China. And the Bonc Of the America takes 9% share of 2nd biggest bank in China for 3 Billion USD. All indicat the US is not losing ground, China takes 1 of US asset, the US takes 5 of China's asset.

niehur SG

Erm, I think ExxonMobil besides selling it overseas, will be refining and selling in China which is a major guzzler of oil and energy. Besides, it will be geographically cheaper to supply oil to US market from Middle East, Africa and Latin America where EM has oilfields.

I don't think US will be actually physically taking that much of China's asset. It will be processing more efficiently and definitely more environmentally friendly and safer, compared to current Chinese technology. The majority of the output again will be to sell into Chinese market without having to import and lose the competitive edge which it will due to the high 20-30% import tax. US is only earning trade surplus when it manages to siphon the profits out of China. China is currently having superior trade surplus with US if I'm not wrong.

Atobe SG

China is a Communist Country testing the concepts of CAPITALISM, and is bringing the concepts of Capitalism back to the "Heartland of Capitalism" in USA.

If US Companies can buy up companies all over the world - (including the taking over of Diamler Benz by Chrysler Motors, and Mazda Motors by Ford, and some other major buyouts), why should there be panic when a third rate China Oil Company make a bid to take over UNOCAL ?

UNOCAL is only a small player in the US Oil Supply chain, and it is quite insignificant in the ranking of all the major US Oil Companies.

It is also very ironical that while China has been generous to grant Oil exploration rights to UNOCAL in China, the Americans should develop a "China Phobia" similar to the outcry caused by the threat of a "Yellow Peril" in the 1950s.

UNOCAL also has similar exploration rights in the other oil rich areas of South-east Asia and Middle East, with all the oil deliveries being contracted to other countries - and not entirely to the USA or to China; and with such contracts lasting at least THIRTY YEARS into the future.

Even if China should gain ownership of UNOCAL, it could not possibly corner all the contracts for the exclusive delivery to China.

iveco SG

I thought Mercedes bought out Chrysler Group? DOn't tell me it's the other way round? Confused

Atobe SG

Originally posted by iveco:
I thought Mercedes bought out Chrysler Group? DOn't tell me it's the other way round?

You are right - it was Daimler-Benz taking over of Chrysler, and Daimler Chrysler taking over of Daewoo Automobiles.

Surpringly, there was little protest when an European Company takes over a Company that is one of the few American icon of the US car industry; and yet they feel so threatened when China takes over a third rate US Oil Company.

Singapore Technologies Engineering taking over of a US Shipyard, that is prime defense contractor, had also caused a tremendous amount of reaction.

http://www.atimes.com/editor/BA14Ba01.html

iveco SG

Daewoo is part of GM group, isn't it? The Chevy cars marketed in Asia are engineered by Daewoo, if I'm not mistaken. Anyway, one major shipping line in the US is now a subsidiary of Temasek-owned Neptune Orient Lines.

38 SG

Let's have some latest update of the development, sure, the investors already gave a strong signal to Chevron by boosting the Unocal share to 66 USD, far more than the Chevron's offering @60USD

CNOOC falls on fears of bidding war

My sense is the US politicians are trying to politicalize the deal in order to contain China. This's not isolated case, US ally Japan also plays their part by trying to lure away Russian of construction oil pipeline to Japan instead of original planned to China.

And the latest development Sino-Japan dispute in East China sea.

All related to the liquid Gold

Atobe SG

The idea should be "engaging" China, and bring it out of its Communist mould into TOTAL and FREE CAPITALISM.

With the population enjoying a high Standard of Living, and with the Communist Government able to contain inflation and moderate the Cost of Living, the quality of life for the Mainland Chinese will be very high.

Over time, the appeal of Communist ideology will lose its original flavor amongst the Chinese population, and the more they are exposed to wealth - which will bring them the luxuries and ability to travel, their Communist soul will be "corrupted" by the Capitalistic ideology.

With more trade exchanges, and a high quality of life, it will be a huge cost for the entire Chinese population to pay, if Communist China decide to embark on any form of military confrontation with Taiwan, or with any of the neighbors around China.

To isolate China will be near impossible in this open and global world, and one will lose more by not trading with China.

However, in our rush to trade with China, one has also to be careful not to allow high technology to filter into China that will help it to modernise her military.

In the rush to take advantage of cheap labor and cheap land, already many nations have rushed into China to invest in high tech industries - with little thought that such seemingly insignificant industries that manufacture consumer items can be modified for military applications.

China is involved in the manufacture of sophisticated digital communication devices, LCD screen with build-in artificial intelligence, high speed computer processor chips, and even the assembly of satellites.

This has allowed China to make a quantum leap into the stratosphere, and by-pass the learning curve in the development of its military and scientific fields.

Today, China is planning to land a man on the moon in about ten years time.

Can we afford not to engage China and bring her into constant contact with every nation ?

niehur SG

Sooner or later, China will have all the technology secrets US is trying to hide. Many of the high tech agencies in US has Chinese in them. Several of which are getting payments from the Chinese govt for info.

Engaging the Chinese in dialogue is indeed the only choice as there's no way to prevent it from growing. However with its economic growth, it is also possible it might start flexing its military might. Don't know how much tolerance the central government and the Chinese citizens have. Take Taiwan back by force. Fight Japan off the controversial seas. If US make another wrong move and appear arrogant to the Chinese govt, will they punish USA by supporting North Korea?

At the one hand US wants to profit from the growth in China but on the other hand, there might be an imbalance of power in Asia. Some of my Chinese colleagues in China was telling me that China should show its millitary might soon to keep US in check. Maybe just idle chit chat but I wonder how prevalent / widespread the feeling and how the people's reactions will influence the central govt's. Only hope that with China opening up, they will also open up their perception of the world outside. Media is still quite biased despite improvements. Will take time, just hope it's in time.

With take-over of foreign firms by Chinese companies, will the existing business culture prevail or Chinese business culture take over? I know the culture of State enterprises is beyond desire and tons of frustrations because I worked with them before. However, I've not worked with Chinese private companies so I'm not sure.

Chinese pride is the one that people fear coz sometimes it is beyond reasoning. With 5000yrs of history and culture, the rest of the world are like monkeys. How often have I heard that in China and outside? Americans and Europeans may be very arrogant in the past too but majority of them has far more respect and tolerance for non-nationals than Chinese (especially the youth re the comment by LKY on Chinese young genration).

I would prefer to have an alternative to trading with China and to see growth in other countries especially in IndoChina, which China is already engaging more aggressively now, and if possible Indonesia and the Philippines if they can haul themselves out from crippling corruption and political instability.