China National Offshore Oil Corporation (CNOOC) Ltd, China's largest offshore oil and gas producer, announced early on Thursday it has proposed to pay US$18.5 billion Unocal Corporation, offering US$67 in cash per Unocal share.

Unocal Corporation is a leading energy resource and project development company.

The offer is about US$1.5 billion more than that made by Chevron Corporation.

If CNOOC is successful, it would be the biggest-ever overseas acquisition for a Chinese company.

In a letter sent to the Chairman of Unocal, CNOOC Ltd. Chairman and Chief Executive Officer Fu Chengyu described the approach as "friendly", saying that the company is seeking a consensual transaction with Unocal. This proposal is being submitted in accordance with the sale proceedings initiated by Unocal.

The combined company would have a leading position in the Asian energy market and an expanded role in the development of China's liquefied natural gas (LNG) market, Fu said.

Further, a successful merger is expected to more than double CNOOC oil and gas production and to increase its reserves by nearly 80 percent to the equivalent of about 4 billion barrels.

Approximately 70 percent of Unocal's current proved oil and gas reserves are in Asia and the Caspian region. It is expected that the merged company would also have an improved oil and gas balance, with total reserves of approximately 53 percent oil and 47 percent natural gas.

If successful, CNOOC would assume Unocal's net debts and have to pay a US$500 million break up fee to Chevron.

CNOOC said it would borrow the funds needed to finance the offer. It has secured bridging loans totaling US$3 billion from Goldman Sachs Group Inc. and JP Morgan Chase & Co. and US$6 billion from Industrial and Commercial Bank of China. CNOOC will borrow a further US$7 billion from its parent, China National Offshore Oil Corp.

Established in Hong Kong in August 1999, CNOOC was listed both on the New York and Hong Kong stock exchanges in February 2001. It was later admitted as a constituent stock of the Hang Seng Index in July 2001.

As China's third largest oil and gas producer, the CNOOC Group mainly engages in offshore oil and natural gas exploration, development, production and sales.

California-based Chevron announced on April 4 that it had reached an acquisition agreement with Unocal with its cash and stock offer. On June 7, CNOOC Ltd informed the Hong Kong Stock Exchange that it was considering making an offer for Unocal.

(Xinhua News Agency June 23, 2005)