CNOOC wages public relations, lobbying battle for Unocal

LOS ANGELES — Chinese state-controlled oil and gas company CNOOC is waging a high-stakes public-relations campaign to focus its bid for U.S. energy producer Unocal on shareholder value and away from politics.

The company has hired high-powered public-relations and lobbying teams to steer Unocal shareholders, regulatory bodies, legislators and the media from the notion that the proposed deal is an attempt by the Chinese government to deprive the United States of vital energy resources.

CNOOC Chief Executive Fu Chengyu wrote to Congress yesterday that the company is eager to have the U.S. government scrutinize the deal's national-security implications, seeking to address concerns circulating among lawmakers.

Even before making public its $18.5 billion bid for Unocal last week, competing with a $16.6 billion deal with Chevron, members of Congress sent President Bush a letter warning him of the threats posed by China's "pursuit of world energy resources."

A separate letter circulated in Congress, also calling on the Bush administration to investigate — through the aegis of the Committee on Foreign Investment in the United States — the national-security implications of a deal with CNOOC.

In the face of such scrutiny, the Chinese company has aggressively sought to paint its bid as a straight economic deal.

"This is a commercial deal, a commercial bid from one New York Stock Exchange-listed company to another New York Stock Exchange-listed company designed to improve shareholder value for both," said Mark Palmer, a managing director at Public Strategies of Austin, Texas, one of two public-relations firms hired by CNOOC.

Public Strategies has close ties to Bush. One of its top executives, Mark McKinnon, served as a media adviser to the Bush-Cheney campaign.

McKinnon is not working on the CNOOC account, and Bush spokesman Scott McClellan sidestepped a question about the firm's close administration ties at a news briefing yesterday.

In his letter to Congress, Fu attempted to address some of the concerns the deal raises about America's energy security by noting that Unocal's oil and gas production amounts to less than 1 percent of all U.S. consumption.

He also reiterated his belief that CNOOC's all-cash offer would benefit Unocal shareholders and that substantially all of the company's U.S.-based workers would retain their jobs.

"We know this bid is historic for both companies and will be closely scrutinized by everyone involved," he said. "I want you to know that we encourage that review and welcome the opportunity to participate."

Last week, CNOOC also said it would continue to sell "substantially all" of the crude oil and natural gas produced by Unocal domestically to the U.S. market.

Even the choice of words is an issue. The company has been framing its bid as a friendly offer and has objected to media describing the bid as hostile or even unsolicited.

It notes Unocal had invited bids from companies, including CNOOC, before accepting Chevron's offer. CNOOC submitted its bid after the agreement between Chevron and Unocal only because its board insisted on doing an independent review of the transaction, delaying its offer.

CNOOC also notes that four of its eight board members are independent, nonexecutive members in keeping with Securities and Exchange Commission guidelines for corporate governance. Those four are non-Chinese and the company's business, including board meetings, is conducted in English.

CNOOC's lobbying and public-relations efforts also are focused on correcting what it sees as an outdated image of Unocal as an American oil and gas company.

The vast majority of Unocal's reserves are in Asia, and the company that once was famous for its "Union 76" filling stations sold that business long ago.