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One word: hegemon.
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The only conclusions are that China doesn't really know what it's getting into, that it's getting bad advice from Goldman Sachs and the rest of its American advisors on the Unocal deal, or that there is something deeper involved in its quest for Unocal. In our opinion, the latter is the more likely case.

Here are three interesting facts put forth by the Journal:

"In the case of Thailand, all of Unocal's gas production is committed to a single Thai buyer. The gas is committed through long-term sales agreements that have expiration dates ranging from 2010 to 2029. Even if those contracts weren't in place, it would be difficult and costly for China to send the gas elsewhere because the pipelines or other infrastructure to do so don't exist. Building such infrastructure likely would require the consent of the Thai government, which relies on Unocal's gas to fuel its booming power sector."

"The idea that China might build a gas terminal to ship liquefied Thai gas to China ["is absolutely preposterous,"] says John Vautrain, a vice president and director in Singapore of Purvin & Gertz, a Houston oil and gas consultancy. ["The Thais wouldn't let you."]

"Unocal's Myanmar output also is sold to Thailand. Its Bangladesh gas generally is reserved for Bangladeshi consumption. The picture is somewhat different in Indonesia, where Unocal holds interests in a number of promising fields whose output probably would be earmarked by Cnooc for the China market, according to people familiar with the company's strategy."

In our opinion, the Journal, while clearly listing some interesting observations is missing an important point.

China's purchase of Unocal, even if it did not lead to the diversion of natural gas toward its own borders, would give it control of the energy supply used by Thailand, Myanmar, Bangladesh, and Indonesia. It would also put some pressure on Japan and South Korea.

In other words, in one fell swoop, China would become the energy czar for a significant portion of South East Asia, and would gain valuable leverage with which to further its other goals, the expansion of its influence, and the ability to project its power. A scenario in which China could use its leverage to gain concessions from the four countries mentioned, including the placement of military bases, fueling stations for submarines and merchant ships, and the placement of surveillance equipment and communication relay stations in all of those countries is an easy next step to visualize.

All the while, China could also make money by continuing to sell energy to those countries by honoring existing contracts, while negotiating more lucrative ones in the future.

Indeed, the Unocal purchase can easily be looked upon as a threat to national security, especially if you live in Thailand, Myanmar, Bangladesh, Indonesia, Japan, or anywhere else in Asia.

http://www.rigzone.com/news/article.asp?a_id=23528