US likely to give nod to CNOOC deal

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The US$1.08 billion deal between China's largest offshore oil company, CNOOC Ltd, and US company Chesapeake Energy Corp will likely pass a review by the Committee of Foreign Investment in the United States (CFIUS), despite possible US political opposition, experts have said.

CNOOC will buy a 33.3 percent interest in Chesapeake Energy Corp's Eagle Ford shale project in southern Texas. The transaction is expected to be completed in the fourth quarter of this year.

Some US legal experts said the deal will likely get a full, 75-day CFIUS review, but the committee is unlikely to oppose it.

It is unknown whether CFIUS, the interagency committee spearheaded by the US Treasury Department to review transactions that may affect national security, has received the review notice.

Natalie Wyeth, the US Treasury Department's public affairs spokeswoman, said the department cannot reveal any information.

"By law, information filed with CFIUS may not be disclosed by CFIUS to the public," she told China Daily on Tuesday.

"Accordingly, the department does not comment on information relating to specific CFIUS cases, including whether or not certain parties have filed notices for review."

Trade expert Derek Scissors, with the Heritage Foundation research institute, said this investment will be passed by the CFIUS.

"Joint ventures can be subject to review, and a CFIUS review is required when a foreign investor is thought to be acting on behalf of a foreign government," he told China Daily.

"Since CNOOC is a centrally controlled State firm, it can be considered to be acting on behalf of the central government. Some in China may object to this characterization, but that would be unwise.

"A CFIUS review is a concrete process that will remove some of the political elements from the investment and make it more likely to be completed."

In 2005, CNOOC gave up plans to acquire Unocal Oil Co after the bid met unexpected US political opposition. Some had viewed the proposed merger as a threat to US security.

Several proposed Chinese investment projects in the US have encountered political obstacles this year. Some Congress members blamed China for the high US unemployment rate and regard the emerging economy's global expansion as a national security threat.

China has appeared as a "scapegoat" for the wobbly US economy in the fierce campaign for November's midterm elections. At least 29 candidates have aired advertisements blaming their opponents for being too sympathetic to China, the New York Times reported on Saturday.

Strong political opposition to the CNOOC deal is likely, given the recent congressional objections to Anshan Iron and Steel Group's investment in a small US steel company, said Scissors from the Heritage Foundation.

"However, this is a period of political transition," he said.

"Congress is not in session right now. Then (comes) the election and lame-duck session, and then the new Congress will have far more important things to consider than the CNOOC investment. This may cause the investment to be largely ignored."

Philip Levy, a resident scholar with the American Enterprise Institute, said the notice might not be filed before the midterm elections.

"Whether or not the investment is formally required to go through CFIUS, I would suspect it will be submitted voluntarily," he told China Daily.

"If it is, it would be unlikely to emerge from the process before the midterm election. That may shelter the transaction from the political currents swirling about at the moment, though concerns about Chinese investment are unlikely to disappear anytime soon."

He said he has not seen anyone take up the CNOOC investment as a "cause clbre".

Zhang Fan, an American Studies researcher at the Chinese Academy of Social Sciences, said the deal will benefit both sides and should not be viewed as a threat to US oil security.

The cooperative agreement will help Chesapeake Energy Corp acquire much-needed money to develop the project while CNOOC can obtain technical know-how.

Zhang expected the deal to get a green light from the US regulator.

Fan Jishe, a professor of American Studies with the Chinese Academy of Social Sciences, said the deal is purely commercial.

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