China calls for calm on oil deal

CNOOC wants to tap Unocal's Asian oil fields

Chinese officials have appealed for less political wrangling over a Chinese state-run oil firm's bid for mid-sized US oil firm Unocal.

US lawmakers want close scrutiny of the $18.5bn (£9.8bn) bid by China National Offshore Oil Corp (CNOOC) for Unocal, which tops an offer from Chevron.

The takeover bid should be viewed as a "normal commercial activity", a Chinese foreign ministry spokesman said.

Top bosses from CNOOC and Unocal have begun talks to explore the deal.

Informal talks were held in New York on Monday led by CNOOC chief financial officer Yang Hua, and formal sessions are planned this week, the Reuters news agency reported.

CNOOC chief executive Fu Chengyu is believed to be travelling to New York to take part.

Political friction

"We think these commercial activities should not be interfered in or disturbed by political elements," said Liu Jianchao, a spokesman for China's Foreign Ministry.

Unocal has said it is willing to talk to CNOOC but still prefers the earlier, agreed buyout offer from US firm Chevron.

Although lower, Chevron's offer involves less debt.

Forty-one Democrat and Republican politicians have raised concerns that a CNOOC takeover could compromise US national security.

They made their case in a letter to US Treasury Secretary John Snow.

CNOOC has said it is ready to co-operate with any inquiry by the US Treasury Department and welcomes the chance to make its commercial case.

"It is important to know that 70% of Unocal's current reserves are located in Asia, and that is one of the reasons this transaction makes sound business sense for our company", China's official Xinhua news agency quoted Mr Fu as saying.

Money in place

CNOOC published details of how it plans to pay for Unocal on Tuesday, involving substantial loans from its parent company, a major Chinese state-owned bank, and its financial advisers.

The plans are unlikely to appease US lawmakers who have argued that the buyout plan is driven by Chinese government policy, and is not strictly commercial.

CNOOC has about $3bn in cash, and is offering $18.5bn for Unocal.

Its state-owned parent company - also called CNOOC - would put up $7bn in two separate loans.

It would also get $6bn in short-term loans from the Industrial and Commercial Bank of China, and another $3bn loan from its advisers, JP Morgan and Goldman Sachs.