The move could set off a bidding war, analysts said, with the China National Offshore Oil Corp., or CNOOC, insisting it is not yet out of the running ahead of a vote by Unocal shareholders on August 10.

The California firm's board said late Tuesday it had accepted a revised offer from Chevron worth 17.1 billion dollars in cash and stock, less than CNOOC's all-cash bid of 18.5 billion dollars.

"Our increased offer has been driven by competitive circumstances, but even at this higher price it remains a compelling transaction for Chevron stockholders," Chevron chief executive David O'Reilly said.

But CNOOC, which trumped a Unocal-Chevron tie-up in late June with the boldest takeover offer yet by a Chinese company, said it remains in the hunt.

"Our reaction is that we still have the superior offer and it is superior because we are making an all-cash offer at 67 dollars a share," Ray Bashford of Brunswick Group, CNOOC's media relations firm, told AFP in Hong Kong.

The new Chevron bid values Unocal at 63.01 dollars per share based on its closing price Tuesday. Chevron's previous offer was for 60.51 dollars in cash and stock.

The revised offer consists of 40 percent cash and 60 percent stock, making it vulnerable to market swings in a way that CNOOC's all-cash offer is not.

"We expect the bidding war for Unocal to heat up in the next few days, which could ultimately lift the shares to 70 dollars or even higher," Oppenheimer and Co. oil analyst Fadel Gheit said in a note to clients.

"CNOOC has deemed Unocal assets in Asia a 'must have' and the transaction puts the Chinese government's pride on the line," he said.

Unocal shares were up eight cents at 65.07 dollars in late trade. Chevron was 24 cents higher at 57.54 dollars, but US-traded shares of CNOOC were down seven cents at 59.98 dollars.

Most of Unocal's oil and gas assets are in Asia, notably in Thailand, Indonesia and central Asia. That makes it a prize target for China, which needs all the energy supplies it can get to feed its breakneck industrial growth.

"The ball is now in CNOOC's court and a higher bid or a guarantee could seal the deal, as we think Chevron is unlikely to close the gap," Gheit said.

Investors expect CNOOC to have to cough up at least two billion dollars more than Chevron if it wants to grab Unocal, given the ferocious opposition that its bid has aroused among some quarters in Washington.

Many US lawmakers are aghast at the prospect of the ninth-largest US oil firm falling into the hands of communist China, exposing growing fissures in the Sino-US trade relationship.

The House of Representatives has passed a non-binding resolution calling on the White House to block the Chinese bid on national security grounds.

But Beijing is adamant that the deal is a purely business transaction that should not be derailed by politics.

If CNOOC fails to acquire Unocal, analysts have said that it may look to other targets in Asia to secure gas supplies for its terminals.

Potential deals could include stakes in Woodside Petroleum or Santos of Australia, or even whole companies such as BG Group or US-based Marathon.

"The question is whether CNOOC now loses patience and walks away, or deals the knockout blow," Deutsche Bank oil analyst Paul Sankey said. "We feel that Chevron will not raise again."

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