Bloodied CNOOC remains undeterred

Bitter experience in Unocal takeover battle won't halt the mainland oil giant's overseas expansion drive

No one would blame CNOOC for throwing in the towel. Fighting on foreign turf against Chevron, a company five times its size and 100 years older, the last thing the Chinese firm needed or expected in its suit for Unocal was a lesson in protectionism from the US Congress.

Still, in takeover battles as in brawls, down is not always out. The question is whether it's worthwhile getting up again.

CNOOC is wary of a bidding war where it is stuck paying a premium, according to a source close to the company.

'This is a tactical thing. If CNOOC increases its bid to US$69, then Chevron may raise to $65; if CNOOC goes to $71 Chevron may bid $67,' the source said. 'This is a very likely scenario because Chevron can't lose face over this.'

At the same time, political obstacles make CNOOC's prospects look increasingly bleak. The US Congress tentatively scheduled a vote by Friday on an energy bill that could delay a CNOOC-Unocal tie-up by subjecting it to a protracted 120-day review.

'CNOOC has underestimated the political force in the US,' said DBS Vickers Securities analyst Gideon Lo Wai-yip. 'If CNOOC raises its bid now, it will attract more opposition. It's better to leave it to Unocal's shareholders to decide.'