updated 7/29/2005 7:53:37 AM ET 2005-07-29T11:53:37

CNOOC Ltd. is weighing whether to raise its bid for U.S. oil company Unocal Corp. to as much as $20 billion or drop it entirely due to political obstacles in Washington, newspapers reported Friday.

State-controlled CNOOC, China’s third-biggest oil company, has drafted plans to raise its $67-a-share offer to more than $70, topping a competing bid by Chevron Corp. by some $2 billion, the Financial Times said. It said that plan hasn’t been approved by the Chinese company’s board.

But the FT and Hong Kong’s South China Morning Post said CNOOC also is considering scrapping its offer.

“There is literally no point to pursue this any further. The dirty Washington politics has basically killed the deal,” the Post quoted an unidentified source familiar with the matter as saying.

A CNOOC spokesman in Hong Kong rejected the front-page report in Hong Kong’s biggest English-language newspaper as speculation and would not comment on the FT report.

“The offer is still effective, and we’re still monitoring the situation,” the spokesman told The Associated Press Friday on condition of anonymity.

Unocal spokesman Barry Lane said Thursday that he was aware of the report, but would not comment on it.

Unocal, based in El Segundo, Calif., first agreed to be acquired by Chevron in April for $16.6 billion in cash and stock.

But two months later, Hong Kong-based CNOOC — 70 percent owned by the Chinese government’s China National Offshore Oil Corp. — offered $18.5 billion in cash for Unocal.

The bid sparked fears in the U.S. Congress that the proposed deal presented risks to America’s economic and national security. A flurry of legislation intended to derail CNOOC’s offer has been introduced in both houses of Congress.

Last week, Chevron sweetened its offer for Unocal to $17 billion, and Unocal’s board recommended that shareholders, scheduled to meet on Aug. 19, approve that deal.

On Thursday, CNOOC denied media reports that it was increasing its Unocal bid, China’s official Xinhua News Agency said.

“So far, CNOOC’s 67 U.S. dollars per share all cash offer has not been changed and remains in effect,” Xinhua quoted the spokesman as saying. “There are many guesses recently on whether CNOOC will sweeten its bid for Unocal. As for those guesses, the CNOOC won’t make any remarks.”

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