Chinese oil company Cnooc Ltd. today abandoned its rival bid for California-based oil and natural gas provider Unocal Corp., the largest attempted takeover by a Chinese company, citing the "political environment in the U.S."
The move unblocked the way for Chevron Corp.'s $17.4 billion bid for the El Segundo-based Unocal. Chevron, the second largest U.S. oil company, is now the sole bidder for Unocal.
The takeover effort by Hong Kong-based Cnooc, whose parent company is 70 percent owned by the Chinese government, had heightened concern among U.S. lawmakers about compromising U.S. economic and national security at a time when crude oil is trading near record levels.
In an e-mailed statement, the Chinese company said it had considered raising its $18.5 billion bid and "would have done so but for the political environment in the U.S."
Chinese oil companies such as Cnooc, China's third-largest, are on the hunt for overseas deposits because Chinese oil production hasn't kept pace with the ever-increasing demand for oil in China. China's oil needs have more than doubled during the past 10 years and China now ranks as the world's second largest oil user after the U.S.
The Chinese company's move came one day after influential proxy voting advisory firm Institutional Shareholder Services Inc. endorsed Chevron's bid.
The Rockville-based ISS said Unocal shareholders should vote in favor of Chevron's offer because Cnooc's bid risked being rejected by policymakers.
It also came after two more members of Congress criticized the Chinese company's takeover attempt.
Rep. John D. Dingell of Michigan, ranking Democrat on the House Energy and Commerce Committee, attacked what he called below-market financing for Cnooc provided by the Chinese government.
"If China can finance [the Unocal] acquisition on such favorable terms, there is no reason to believe it could not, would not, or has not already subsidized acquisitions in other sectors to acquire other companies in key industries and unfairly compete against American firms and workers," Dingell wrote in a letter to Commerce Secretary Carlos M. Gutierrez.
Sen. Evan Bayh (D-Ind.) issued a statement responding to news reports that Cnooc might wait until Congress adjourned for August before increasing its bid. He said the move would challenge Congress's right to regulate foreign commerce.
"You can be sure that I will not be alone amongst my colleagues, in the Senate and in the House, who will be paying attention to what happens in the coming days, and if need be, will be prepared to act when Congress returns in September," Bayh said.
Unocal is likely to win approval from a majority of Chevron shareholders next week.
Washington Post staff writer Ben White contributed to this report