Financial Times: Chevron upbeat on CNOOC: Wed 31 August 2005

By Victor Mallet andShawn Donnan in Jakartaand Enid Tsui in,Hong Kong

Published: August 31 2005 03:00

David O'Reilly, Chevron chief executive, yesterday predicted a return to normal relations with CNOOC following the US oil group's victory this month in the politically charged takeover battle for Unocal.

The five-month tussle generated intense opposition in the US to the state-controlled Chinese company's plans to acquire California-based Unocal, before Chevron's lower-priced offer prevailed.

Mr O'Reilly brushed aside suggestions that Chinese bitterness over the Unocal affair would affect current or future Chevron-CNOOC partnerships in China and the region as the US group continues its heavy investment programme.

"CNOOC is a mature company and we've been doing business with them for 20 years," Mr O'Reilly said in an interview in Jakarta.

"I'm confident that if the norms of our industry apply here, which I assume they will, we'll get on with life."

Chevron has been in talks with CNOOC for two years over the Chinese company's participation in the Gorgon liquefied natural gas project on Australia's North West Shelf, in which the US group has a 50 per cent share and ExxonMobil and Royal Dutch Shell each have 25 per cent. Chevron said it "remained committed" to concluding a LNG deal with China. Talks have centred on CNOOC's equity participation in exchange for taking LNG to China. Chevron and CNOOC also have a15-year-old oil production partnership in China's Pearl River Mouth Basin.

Fu Chengyu, the CNOOC chief executive who led the audacious bid for Unocal, gave a curt reply yesterday when asked whether CNOOC was in talks with Chevron over future co-operation.

"My answer to that is, no, CNOOC is not talking to Chevron regarding any form of co-operation at the moment," he said at a results briefing. However, Mr Fu qualified this by saying the Gorgon talks were continuing.

Anti-China sentiment in the US Congress torpedoed CNOOC's $18.5bn approach to Unocal even though it exceeded Chevron's $17.8bn offer.

Asked about winning with the lower bid, Mr O'Reilly referred obliquely to the political delays that hampered the CNOOC offer: "It may be nominally a lower bid [than CNOOC's], but when you take the time value of money into account, I would argue that it was not a lower bid." 

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