Critics say US$18.5b offer could erode US control of world petroleum supplies CNOOC's US$18.5 billion bid for oil firm Unocal faces fierce opposition in the United States, where critics warn it could erode American control over global petroleum supplies. US politicians are already lining up to denounce the proposed deal, saying that Chinese ownership of a core American energy firm constitutes an unacceptable security risk. 'The $18.5 billion is cash from the US trade imbalance,' said US Congressman Roscoe Bartlett. 'That gives China the leverage they need to buy up increasingly scarce oil resources around the world. If China buying a US oil company isn't an alarming wake-up call, what would be?' Bill Hawkins, an analyst with the US Business and Industry Council, said: 'This deal speaks to the failed American trade policy with China. Instead of buying American products with the gains from its trade surplus, China is buying our productive assets.' Hong Kong-listed CNOOC's unsolicited offer for the California-based firm trumps an April bid from US rival Chevron by US$1.5 billion, underscoring China's enormous international buying power as well as its huge thirst for energy. As new demand for petroleum soars in China and India, conventional oil production may peak within a few years, prompting an international scramble for supplies, analysts said. Securing supplies now is a top priority for Beijing, one that may well put it on a collision course with the US. Speaking at the Foreign Correspondents' Club in Beijing, former US senator Bob Kerrey said he doubted that the US Congress would allow the deal to pass. But CNOOC is gearing up for a political fight. 'This transaction is purely a commercial transaction,' chairman Fu Chengyu said yesterday. 'We are confident that the US government will support this project.' Mr Fu said the company was ready to sell certain assets, such as oil depots and pipelines, in North America should US regulators make it a prerequisite for approving the deal. As the US was a supporter of global free trade, it could be expected to treat CNOOC fairly in the transaction, he added. CNOOC said in a statement yesterday: 'The transaction will not adversely affect the US oil and gas market, as Unocal's US oil and gas production accounts for less than 1 per cent of total US oil and gas consumption.' In an interview with Dow Jones Newswires, CNOOC chief financial officer Yang Hua said his company would retain all Unocal employees in the US, while Chevron planned layoffs. CNOOC has proposed to pay for the acquisition in cash, whereas Chevron's deal included both cash and shares. The deal would see CNOOC's oil and gas reserves swell by 79 per cent to 3.98 billion barrels of oil equivalent. The deal must be approved by shareholders of both CNOOC and Unocal, as well as regulators in the US and Canada. To finance the acquisition, CNOOC has arranged a US$6 billion loan from the Industrial and Commercial Bank of China and a US$3 billion loan from its financial advisers JP Morgan and Goldman Sachs.