CNOOC Is Not Yet Ready for Unocal

The takeover battle between an American oil giant and a Chinese energy company for US-based Unocal Corp, which has extensive oil and gas operations in Thailand, Indonesia and Central Asia, climaxed last week in the American Congress. US lawmakers blocked the proposed bid by China's CNOOC Ltd – paving the way for Chevron Corp, a US oil giant, to have the upper hand in the takeover. If certain sections of American society have views and positions on this latest US-versus-China agenda, what do the Thai people think, or what should they be thinking? After all, Thais, including government officials, have remained remarkably quiet on this issue, even though Unocal and its exploration and production activities in the Gulf of Thailand are central to the country's energy security.

Thailand in general embraces the free market. We would welcome American, Chinese or any other investments as long as they contributed to long-term development of the country. Any strings tied to these investments, including a hidden hegemonic or political agenda, would not be welcome.

Thailand does not want to have to choose between either America or China over the Unocal takeover. We are friends of both.

Of course, the Unocal takeover is a private affair and should be considered in this light. The side with the best terms and conditions should win. Thailand in principle should support any owner that can provide a steady supply to meet the Kingdom's energy needs over the long term and at a competitive price.

In this light, Chevron has an edge. Through its ownership of Caltex Oil, a well-known brand in Thailand, it has a recognised credibility. Caltex has previously invested US$1 billion (Bt41.39 billion) in an oil refinery on the Eastern Seaboard. The company has also been an employer of a number of Thai executives who since went on to other jobs, taking with them the business professionalism and skills learned at Caltex. The same cannot be said of CNOOC, both in terms of its financial standing and immediate objectives.

Its offer to buy Unocal for the huge sum of $18.5 billion would greatly dent its finances, raising questions about the sustainability of Unocal oil and gas operations in the long run. Surely, Thailand needs a secure partner here, not one full of uncertainty.

Moreover, CNOOC's immediate objective is also to source oil and gas supplies to energy-hungry China, furthering the uncertainty. Majority Thai-government-owned PTT might have locked in a long-term contract to buy gas discovered in the Gulf of Thailand from Unocal, but CNOOC, as the new owner of Unocal, might have a different idea.

Both of these issues are handicaps for CNOOC, but they can be addressed over time. And they they should be, because after all, Thailand wants to embrace Chinese investment. But a long-term track record in business is important, especially in the energy sector, and so too is CNOOC's standing in the eyes of the Thai public. The Chinese and Thai governments might have built up good relations over the past 30 years, but very little is known about Chinese state enterprises and companies. The enigma must be demystified if confidence is to be established.

And if there were only one single genuine gripe about China taking over Unocal, it would be that the US company has a long history of dealing with unsavoury regimes, especially the repressive Burmese junta. Under American ownership, a company is placed under the public spotlight, due to cases like the civil suit filed by Burmese activists against one company it accused of being partly responsible for human-rights abuses during the construction of the Yadana gas pipeline.

As a Chinese government-controlled company, Unocal might be able to conduct activities with very little public scrutiny. CNOOC in Burma would mean more Chinese support to Burma and could strengthen the military junta. Chevron, however, has indicated that it would sell all of its shares in its joint venture with PTT in the Burmese gas exploration and production.

In many ways, Thais have not really adjusted their mindset over the emerging role that China and Chinese companies will play here and elsewhere in the region. The 30th anniversary of Thai-Chinese diplomatic relations is a good time to start. Both governments have done well, but more can be done at the people-to-people level. Both sides should be frank with each other and listen to each other. Any problems and suspicions should not be glossed over.