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Financial Times: Chevron chief regrets taint of xenophobia: “Unocal's assets moved Chevron past Shell, to third place, in terms of proven reserves…”: Thursday 11 August 2005


By Sheila McNulty in Houston

Published: August 11 2005


Dave O'Reilly, Chevron's chairman and chief executive, yesterday attempted to put behind him the acrimony surrounding the high-profile bid battle for Unocal between his company and China's CNOOC.


"It was very regrettable there was China-bashing here," Mr O'Reilly said. He believed criticism of CNOOC arose because it was owned by the Chinese government and not a purely commercial company. "There is a policy issue here," he added.


He did not believe Chevron's opposition to competing for assets against the Chinese government would affect its opportunities in China, or its relationship with CNOOC, which goes back to the 1980s. "It is not unusual for partners to compete," he said.


The months-long battle for Unocal's energy assets ended yesterday as shareholders agreed to be acquired by Chevron for $17.8bn, forming the fourth-largest publicly-traded energy company in the world, in terms of production.


Unocal said 77.2 per cent of the company's outstanding stock, or 210.3m shares, were cast in favour of the deal. Approval had been expected after CNOOC declined to counter Chevron's final offer, valued at $63 per share in cash and stock.


Mr O'Reilly said the deal was "very, very accretive" to Chevron's strategic positions in Asia, the Caspian Sea and the Gulf of Mexico.


Unocal's assets moved Chevron past Shell, to third place, in terms of proven reserves and edged it past Total, with whom Chevron had tied for fourth place in terms of production, he said.


Although CNOOC's bid was higher, at $67 per share, and all-cash, it risked being blocked by Washington on national security grounds. Unocal's board feared a deal with CNOOC might face delays and possible derailment.


The battle for Unocal underlines the difficulties the world's oil and gas companies are having finding new reserves amid rising global demand for fossil fuels. And it points to how nationalistic future battles over remaining resources might well become.


The escalation in oil and gas prices justified for analysts the high price paid by Chevron for Unocal, an independent oil and gas group based in California.


"It's a bid on what long-term prices are going to be," said Bryan Caviness, senior director at Fitch, who covers Unocal.


"We think prices will come back, so, from that perspective, it's a pretty hefty price that's being paid." Nonetheless, he favoured it, noting, there were "a lot of organic growth opportunities with the Unocal transaction". 


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