The CNOOC bid presumably is motivated by two things.
One, Beijing has plenty of cash, and already holds more Treasuries than it wants, so it wants to diversify its portfolio. As I argued earlier, China’s external portfolio is overweight US treasuries (not a good long-term bet, as the Economist’s Buttonwood notes) and underweight oil. Compare China’s overseas assets with US overseas assets and you’ll see what I mean.
And two, as Joseph Kahn notes, Beijing worries about its increased dependence on imported energy, and believes that greater Chinese participation in oil and gas production would increase its security. (Kahn link — and much more — from China matters).
That presumably explains why CNOOC is willing to pay above market for Unocal, helped along by low-cost financing from the Chinese state. Listen to Paul Sankey in the FT:
This is a high-level political decision that makes little sense on a corporate level by western conventions,” said Paul Sankey of Deutsche Bank. The deal, he said, would push up CNOOC’s debt-to-equity ratio to 280 per cent. That leads him to believe CNOOC’s decision to bid on Unocal was politically motivated.
But before going into the broader issues, it is worth noting four things upfront. a) most of Unocal’s key assets are in Asia, not the US — and CNOOC has indicated it is willing to sell certain pipelines and storage facilities in the US.