China National Offshore Oil Corporation Ltd (CNOOC), the nation's third largest oil producer, is mulling over a counter-offer to trump Chevron-Texaco's US$16 billion bid for US company Unocal Corp, a report said Monday.

CNOOC will use their May 23-24 board meeting as a forum to discuss the possibility of swiping Unocal, the US' ninth largest oil company, from Chevron-Texaco, the Financial Times reported, citing unidentified sources. CNOOC yesterday refused to comment on the report.

CNOOC withdrew from bidding for Unocal last month, making way for Chevron-Texaco to secure the largest take-over in the oil industry in recent years.

CNOOC scrapped its bid when company Chairman Fu Chengyu failed to win unanimous approval from the board for the proposal.

Sources said some board members vetoed Fu's proposal because they believe Unocal, which is similar in size to CNOOC, is too big for CNOOC to swallow.

Days after the acquisition, Erwin Schurtenberger, an independent non-executive director, resigned from CNOOC's board, citing "ill health".

The intention of the counter-offer, however, demonstrates CNOOC's strong interest in buying more overseas reserves to fuel its growth.

Unocal is attractive to CNOOC with its vast prize assets in Southeast Asian countries.

The FT report said that CNOOC had not ruled out going head-to-head with Chevron, although it had no firm plans for an offer.

An anti-trust ruling against the takeover, which would bring together two of the largest US oil groups, could also open the way for a CNOOC bid, the report said.

But analysts also doubt whether CNOOC will have enough financial resources to top Chevron's bid and pay the US$500 million break-up fee agreed.

Shares in both Chevron and Unocal have fallen more than 7 percent since the announcement of the acquisition, but this has largely been due to falling oil prices.

Shares of CNOOC gained 2.3 percent yesterday to close at HK$4.38 (56 US cents) on the Hong Kong stock market.

(China Daily May 10, 2005)