BEIJING - A leading Chinese oil producer abandoned yesterday its $18.5 billion bid to take over Unocal Corp., saying that a political backlash on Capitol Hill over China's growing appetite for oil dimmed the likelihood of concluding the deal.
The announcement by CNOOC Ltd., a Hong Kong subsidiary of the China National Offshore Oil Corp., paves the way for Chevron Corp., the No. 2 U.S. oil and gas company, to proceed with its plan to take over the California oil company.
The scuttling of CNOOC's bid for Unocal marked a setback for China, but is unlikely to halt attempts by cash-flush Chinese companies to bid on U.S. producers to expand global operations. Nor is it likely to end the rivalry between China and the United States for energy as oil prices soar to record levels.
While Unocal's oil and gas holdings aren't considered of critical importance to U.S. energy needs, the Chinese company's June 23 buyout offer for Unocal triggered a political furor on Capitol Hill among legislators who deemed the takeover risky to national security.
In a strongly worded statement, CNOOC blamed "the political environment in the U.S." for its decision to abandon the quest for Unocal, which has major reserves in Asia, particularly in Indonesia, Myanmar (formerly Burma) and Thailand.
"The unprecedented political opposition ... was regrettable and unjustified," CNOOC said. "This political environment has made it very difficult for us to accurately assess our chance of success, creating a level of uncertainty that presents an unacceptable risk to our ability to secure this transaction."
Chevron spokesman Don Campbell declined to comment on CNOOC's remarks.
The marriage is expected to be consummated next Wednesday when Unocal shareholders are to vote on the Chevron offer. CNOOC's withdrawal from the bidding is anticipated to turn the vote into a formality.
A Unocal spokesman said the El Segundo, Calif., company's board remains convinced that it accepted the superior offer.
Chevron, based in San Ramon, Calif., already has government approval for the merger in hand. The company on July 19 sweetened its bid for Unocal by roughly $1 billion to $17.4 billion in cash and stock.
Unocal's board of directors said afterward that it favored the Chevron offer over the higher bid by CNOOC.
Fadel Gheit, an energy analyst at Oppenheimer & Co. Inc., agreed with Unocal's rationale, given the uncertainties surrounding CNOOC's bid, but he doubted a bid from another foreign oil company would have met such stiff opposition.
"If Royal Dutch Shell had come up with an offer $2 per share higher, then Chevron wouldn't be getting Unocal."