Singapore, July 16 (Reuters): US oil producer Unocal Corporation remains in talks with CNOOC over a fine-tuned $18.5-billion counter bid from the state-run Chinese company, people close to the situation said on Saturday.

CNOOC is trying to persuade Unocal’s board to switch back to its cash bid and away from Chevron Corporation’s $16-billion plus stock-and-cash offer, the sources said.

Unocal’s board, which met on Thursday to weigh CNOOC’s offer, has not yet made a decision on whether to change its stance since it needs more time to study the Chinese offer, they told Reuters. No announcement is likely to be made by California-based Unocal or CNOOC immediately, they added.

“There has been a lot of discussions, and the negotiation is still going on,” said one source on condition of anonymity.

Another person close to the situation told Reuters that Unocal and China’s largest offshore oil and gas producer have been negotiating largely through their lawyers, with Unocal “being mindful of all of its legal obligations.”

The sources provided no further comments.

It is in Unocal’s interest to keep both bids on the table for as long as it can, analysts say. Unocal is likely to be pressing both CNOOC and Chevron to sweeten their bids.

Chevron, the number two US oil company, has stood by its deal signed in April, though some analysts and investors expect it to raise its bid as a crucial vote by Unocal shareholders on August 10 draws near.

US political opposition to the Chinese offer is growing as some Congressmen believe that a sale of Unocal, which has assets stretching from Myanmar to the Gulf of Mexico, to a Beijing-controlled firm would harm US national energy security.

Lawmakers and Chevron also say it is hard for Chevron to compete with CNOOC on financing terms. CNOOC’s bid is heavily financed with low and zero-interest loans from state entities.

Among investors, expectations of a bidding war between the two suitors escalated, sending CNOOC shares down 4 per cent on Hong Kong Stock Exchange on Friday on fears it could raise its bid further and cut into any value from the acquisition. Its American Depositary Receipts fell 1.77 per cent.

Mirroring investors’ expectations of a bidding war, Unocal shares have risen steadily to just below CNOOC’s offer of $67 apiece. Chevron’s offer currently is worth just over $60 per share.

Unocal shares were down just under 1 per cent at $65.65 on Friday amid a broader fall in oil and gas stocks.

CNOOC has fine-tuned its bid to provide more assurances for Unocal.