Order Code RS22182
Updated July 26, 2005
CRS Report for Congress
Received through the CRS Web
Unocal Corporation’s Oil and Gas
Bernard A. Gelb
Specialist in Industry Economics
Resources, Science, and Industry Division
Summary
U.S.-based Unocal Corporation is primarily an oil and gas exploration and
production company with operations in North America and overseas. China National
Offshore Oil Corporation (Cnooc), which is largely owned by the government of China,
has submitted a bid to acquire Unocal. Some Members of Congress and others are
concerned that acquisition of Unocal by Cnooc poses a threat to the adequacy and
dependability of U.S. energy supplies, and to national security as well. Data from the
Unocal Corporation indicate that the bulk of Unocal’s oil and gas production and
reserves are located overseas. This report will not be updated.
U.S.-based Unocal Corporation primarily is engaged in the exploration and
production of crude oil and natural gas and project development in the United States and
in various other countries — particularly in Southeast Asia. Among other operations,
Unocal produces geothermal energy that supplies steam to power plants for electricity
generation, performs physical asset and real estate management of Unocal facilities, and
owns a mine in the United States with the capacity to produce some non-energy minerals
(including rare earths).1
China National Offshore Oil Corporation, Ltd., a subsidiary of Cnooc (largely owned
by the government of China),2 has submitted a bid to acquire Unocal. Cnooc, Ltd. has
exclusive rights and overall responsibilities for the exploitation of China’s offshore oil
and natural gas resources in cooperation with foreign partners. Its bid for Unocal attempts
to supercede an April 4, 2005 merger agreement between Chevron Corporation and
Unocal that has been approved by the Boards of Directors of both companies.
Some Members of Congress and others are concerned that the potential acquisition
of Unocal by Cnooc poses a threat to the adequacy and dependability of U.S. energy
1 Unocal Corporation [http://www.unocal.com].
2 Reportedly, the Chinese government owns 70% of Cnooc. See, for example, The Wall Street
Journal, “Oil Battle Sets Showdown over China,” June 24, 2005, p. A1.
Congressional Research Service ˜ The Library of Congress

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supplies and, partly because of this, a threat to national security as well. Some members
of Congress have requested a review of the bid as provided for by statute.3
Because some are concerned about possible effects on U.S. energy and national
security of a successful bid by Cnooc to acquire Unocal, they may be interested in the
quantitative significance and geographical pattern of Unocal’s oil and gas operations. Of
possible particular interest are the proportions of Unocal’s oil and gas operations and
holdings in geographic regions that one might consider to be easily accessible to U.S.
energy needs.
However, because oil is a fungible commodity in a world market, it can be argued
that it matters little where oil supplies originate. Whether Cnooc acquires Unocal or not,
it can much more easily, and at basically the same price, obtain oil to meet China’s
domestic needs from a geographically closer supplier than from North America.4
Countering this is the perception of some that world oil supplies will be very tight
in at least the medium term, and that control of supplies will be advantageous. Petroleum
is an integral input to the economies of industrialized and industrializing countries, and
to the armed forces of any nation. Disruption of supplies can disrupt economic activity
and affect military readiness. But there is some concern that widespread buying up of
energy assets could greatly diminish the size and usefulness of the oil market.5
Extent and Pattern of Unocal’s Oil and Gas Operations
Unocal’s worldwide operations produced a total of 169,000 barrels of petroleum
liquids6 and 1.56 billion cubic feet of dry natural gas per day in the first quarter of 2005.
(Table 1).7 It has total proven worldwide reserves of 681 million barrels of petroleum
liquids and 6.56 billion cubic feet of natural gas.
Unocal’s operations in the United States and Canada combined accounted for 43%
of the company’s worldwide liquids production and 35% of the dry natural gas
production, with the United States accounting for about 80% of the North American total.
Unocal’s U.S. production of 58,000 barrels per day represents 0.8% of U.S. production
of petroleum liquids and 0.3% of U.S. consumption of petroleum. Inasmuch as Canada
is a major oil supplier to the United States, it is reasonable to assume that Unocal’s small
quantity of Canadian production is at least potentially available to the United States. On
3 Commonly called the Exon-Florio provision, the statute is Section 5021of the Omnibus Trade
and Competitiveness Act of 1988.
4 The “price” of North American oil would be lower than that obtained elsewhere if the per
barrel cost of acquiring Unocal’s North American reserves and production facilities should be
lower than the world price.
5 Katinka Barysch. Embracing the Dragon, The EU’s Partnership with China. Centre for
European Reform, London: May 1995, p. 26.
6 Crude oil, condensate, and natural gas liquids.
7 Unocal data obtained from Wright, Robert E. and Nancy A. Murachanian, 2005 Net Production
Outlook, Unocal Corporation, April, 28, 2005 [http://www.unocal.com/investor/index.html].

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the other hand, Cnooc has purchased 16.9% of a small Canadian company with oil sands
holdings.8
The shares of Unocal’s total proved reserves of oil and gas that are in North America
are almost identical to the shares of Unocal’s worldwide production. Forty three percent
of its worldwide liquids reserves and 36% of its worldwide natural gas reserves are
located in North America, with about 80% of each located in the United States (Table 2).
It is clear from the above that operations overseas account for the bulk of Unocal’s
operations and holdings. The rest of the world — primarily Southeast Asia — account
for 57% and 65%, respectively, of Unocal’s worldwide production of petroleum liquids
and dry natural gas. Similarly, the rest of the world accounts for 57% of Unocal’s proved
reserves of petroleum liquids and 64% of Unocal’s proved reserves of natural gas.
Table 1. Production of Oil and Gas by Unocal, by Country
First Quarter of 2005
Liquids1
Dry Natural Gas
(thousand barrels
Region or Country
(million cubic ft. per day)
per day)
North America
73
538
United States
58
455
Canada
16
83
Southeast Asia
76
1,011
Thailand
38
691
Indonesia
38
164
Myanmar
0
76
Bangladesh
1
80
Other Overseas
20
10
Azerbaijan2
14
0
Other
6
10
TOTAL
169
1,559

Note: Details may not add to totals because of rounding.
1 Crude oil, condensates, natural gas liquids.
2 Unocal reports this as the Azerbaijan International Operating Company.
Source: Wright, Robert E. and Nancy A. Murachanian, 2005 Net Production Outlook, Unocal
Corporation, April, 28, 2005 [http://ir.unocal.com/phoenix.zhtml?c=111875&p=irol-irhome].
8 “CNOOC Limited Acquired a Stake in Canada-Based MEG Energy,” April 8, 2005. at CNOOC
L i m i t e d [ h t t p : / / w w w . c n o o c l t d . c o m / c n o o c l t d / / t e m p l a t e
/Template011.jsp?Wc_Id=541&Wg_Id=19].

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Table 2. Estimated Proved Reserves of Unocal by Region
Yearend 2004
Liquids1
Natural Gas
Region or Country
(millions of barrels)
(billions of cubic feet)
North America
295
2,382
United States
239
2,076
Canada
56
306
Asia
203
4,093
Other overseas
183
84
TOTAL
681
6,559
1 Crude oil and condensate.
Source: Wright, Robert E., and Nancy A. Murachanian, 2002-2004 Costs Incurred and Oil and
Gas Reserve Estimates Data, Unoca l C o r p o r a t i o n , M a r c h 9 , 2 0 0 5
[http://ir.unocal.com/phoenix.zhtml?c=111875&p=irol-irhome]. Oil and gas reserve estimates
are subject to change. Risk factors that may result in changes are presented in Unocal’s 2004
Form 10-K submitted to the U.S. Securities and Exchange Commission.
Possible Diversion of North American Oil and Gas?
It is likely that one of the considerations in any U.S. government review of the bid
by Cnooc to acquire Unocal is the risk that oil and gas now produced by Unocal in North
America, and particularly in the United States, will be diverted to markets elsewhere. To
the extent that it is significant, it is clear from the data provided above that the amounts
of such quantities are small relative to U.S. oil and gas consumption. Also, to the extent
it is significant, Cnooc, in proposing its acquisition of Unocal, has committed to continue
Unocal’s practice of selling or marketing in U.S. markets all or substantially all of the oil
and gas produced from Unocal’s U.S. properties.9
9 Cnooc. Transaction Information Site, “The Deal Website of the Proposed Merger of Unocal,”
Overview. [http://www.transactioninfo.com/cnooc/home.php]. Viewed June 29, 2005.

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