Two House committee chairmen from California have asked US President George W. Bush to launch a review of China’s growing energy requirements and the implications for US political, strategic, and economic interests.
Resources Committee Chairman Richard W. Pombo and Armed Services Committee Chairman Duncan Hunter expressed concern about China’s increasing acquisitions of energy assets around the world, including properties of US-based companies.
“We are especially concerned that the government-owned [China National Offshore Oil Corp.] is reportedly seeking to purchase an American oil company,” the two Republicans said in a June 17 letter to Bush.
“Such an acquisition raises many concerns about US jobs, energy production, and energy security,” they maintained.
CNOOC was reportedly interested in buying Unocal Corp. before the US independent producer agreed to be acquired by ChevronTexaco Corp., now Chevron Corp., for about $18 billion, including net debt, on April 4.
Four days later, CNOOC announced that it had bought a 16.69% interest in MEG Energy Corp., a Calgary oil sands company, for $150 million (Can.).
“The investment hits on our focus of long-term growth,” CNOOC Chief Executive Fu Chengyu said. “At the same time, this move provides a good chance for us to exploit the advanced technology and expertise of oil sands development.”
Such technology could be put to work in China, where large reserves of oil shale and oil sands have been found in recent years, he added.
With limited domestic resources, China has embarked on what Pombo and Hunter termed “an aggressive program to secure the energy that it needs to satisfy its strong economic growth and the needs of its population.”
But the two House committee leaders said they fear US companies would find it difficult to compete against China’s state-owned and controlled energy firms.
“A government-owned company such as CNOOC has access to the treasury of the Chinese government, something no company operating in the free market has,” they wrote Bush.
They said that as the world energy landscape shifts, it is critical to understand the implications for American interests “and, most especially, the threat posed by China’s governmental pursuit of world energy resources.”
Acquisition review
Should CNOOC offer to buy a US energy firm, Pombo and Hunter continued, the president should review the proposed transaction under authority granted him in amendments to the Defense Production Act. This would include convening the Committee on Foreign Investment in the United States, chaired by Treasury Secretary John W. Snow, and a review that would include, but not be limited to:
• A full assessment of the types of investments China is making in international energy assets, including those held by US-based companies; whether those investments are market-based and free of subsidies; technology transfer implications of such investments; and how they “relate to the advancement of China’s international agenda.”
• Understanding the nature of China’s energy sector and its relationship to the government.
• Ways to “create a more level playing field in the energy sector so that global energy supplies can be fully developed and flow to world markets on competitive terms.”
• Examining how the US can work with China “to ensure that both countries are pursuing energy interests in a manner that avoids conflict and engenders cooperation.” ✦