updated 7/14/2005 8:59:03 PM ET 2005-07-15T00:59:03

A crucial Unocal Corp. board meeting on Thursday to discuss competing bids from Chevron Corp. and a Chinese oil company ended without any public statement on the outcome, as expectations of a bidding war between the two suitors grew.

Unocal -- which has so far backed Chevron’s offer despite a higher bid from China’s CNOOC Ltd.-- declined to provide any details on the meeting at the company’s El Segundo, California, headquarters.

A Unocal spokesman said it would violate securities law if he disclosed when the company plans to issue a statement.

The jockeyeing between the two suitors -- complicated by strong rhetoric in Washington against the Chinese bid -- has raised fears among investors that an outright bidding war for Unocal could erupt.

Already, CNOOC has tweaked its $18.5 billion bid made last month to provide additional assurances for Unocal, and its shares fell earlier on Thursday on fears it could be forced to raise its $67-a-share cash bid.

“On balance, I would not like to see CNOOC raising their bid too aggressively from here,” said Edmund Harriss, fund manager at the Guinness Atkinson China & Hong Kong Fund, which owns about 11 million CNOOC shares. “I think they have offered a lot.”

But a person familiar with the situation said no decision had been made yet on whether or when CNOOC would hike the bid and that reports of a $69-a-share offer were “pure speculation.”

For now, CNOOC has agreed to set aside roughly $2.5 billion in an escrow account that would be paid to Unocal shareholders if the Chinese firm backed out of the deal, sources familiar with the situation have said.

Chevron, on the other hand, has continued to stand by its $16 billion-plus agreement signed in April, though some analysts and investors expect the company to sweeten its bid as a crucial vote by Unocal shareholders on Aug. 10 draws near.

Chevron must raise its bid or risk losing to CNOOC since Unocal shareholders are unlikely to vote in favor of the lower bid, Oppenheimer analyst Fadel Gheit said in a research note on Wednesday. Unocal’s stock performance in recent weeks indicates that investors expect a higher bid, most likely from Chevron, Gheit said.

Shares of CNOOC fell 1.5 percent on Thursday -- after falling as much as 5 percent earlier in the day -- as investors fretted the Chinese oil company would sweeten its offer.

“The value for CNOOC will start to drop off quite significantly if they raise the bid too much further. I would not be comfortable with that,” said Harriss.

Since CNOOC announced its bid for Unocal in late June, its stock had jumped nearly 19 percent in the three weeks ended on Wednesday.

CNOOC has been battling not just Chevron in this takeover battle, but growing opposition from some U.S. politicians, who say a purchase by a Chinese company could jeopardize national security interests.

In the latest move from Washington, a senior House Republican, whose district includes Chevron’s San Ramon, California headquarters, wants to require the U.S. Energy Department review the Chinese bid as part of a sweeping energy bill that House and Senate negotiators began discussing on Thursday.

A CNOOC spokesman said California Republican Richard Pombo’s move “crossed the line” and said that if implemented, could be tantamount to state control of business.

The Chinese company has agreed to make guarantees it can meet all U.S. national security-related requirements and sell its U.S. assets if required, sources have said.

CNOOC plans to respond tactically and immediately if the Unocal board rejects its bid or Chevron sweetens its offer, one source said.

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