updated 7/13/2005 11:14:51 AM ET 2005-07-13T15:14:51

The board of CNOOC is expected to meet on Wednesday to approve changes to its $18.5 billion takeover bid for Unocal following several weeks of negotiations with the U.S. oil and gas group.

CNOOC directors will also consider granting management a green light to raise the state-owned Chinese company's offer above its current level of $67 a share in cash, according to people familiar with the matter.

CNOOC is attempting to break up an existing deal, under which Unocal is to be acquired by Chevron, the U.S. oil major, for a mix of cash and stock worth between $60 and $61 per share.

The decision to consult the board is a sign of the Chinese company's determination to avoid a repeat of a dispute between the management and non-executive directors that forced it to delay its initial bid.

Unocal's 10-member board is expected to gather on Wednesday to consider whether to continue supporting the Chevron transaction or to switch its recommendation in favor of CNOOC.

Unocal could also make no immediate decision, insiders warned. People close to CNOOC on Tuesday emphasized its determination to secure a victory in the takeover battle the first of this scale by a Chinese company.

One person close to the Chinese offer said: "The board is unified. The board is interested in winning. Everyone is on the same page."

Since June 22, when CNOOC made its offer public, executives from the Chinese company and Unocal have been in talks about what kind of modifications to the bid might lead it to be declared "superior" to Chevron's by Unocal directors.

Among other things, CNOOC's management is believed to have pledged to dispose of Unocal's US assets, if required by regulators, and to maintain pension benefits for all of Unocal's 6,600 employees.

But ultimately, CNOOC may need to raise its offer above $67 per share to secure a favorable decision. CNOOC had already been poised to make an offer to acquire Unocal in late March, but withdrew from the process at the 11th hour after its non-executive directors expressed concerns they did not have enough time to review the deal.

This paved the way for Chevron to secure its deal to buy Unocal. Meanwhile, CNOOC's offer will be the subject of a hearing in Washington today before the house armed services committee.

Additional reporting by Stephanie Kirchgaessner in Washington.


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