BEIJING (AFX) - Unocal Corp has told CNOOC Ltd it will consider withdrawing its backing for a 16.5 bln usd bid by Chevron Corp in favour of the Chinese company's 18.5 bln usd offer if it pledged to meet a number of conditions, the Financial Times reported.

The newspaper, citing people close to the situation, said the conditions include requests for divestments and other demands from US regulators.

The paper said CNOOC and Unocal have been in negotiations over the state-controlled group's landmark bid for the last 10 days.

The US oil and gas group has set out what it would take for the Chinese offer to be declared "superior" to Chevron's.

Negotiations have also focused on specific pledges CNOOC might be prepared to make to defuse US regulators' concerns, the paper said.

The CNOOC bid, launched last month, was pitched at a premium to Chevron's offer partly because of fears Washington could block the Chinese group's takeover.

With the price of CNOOC's bid so far fixed at 67 usd a share, the talks have turned to other details in the merger agreement, such as a "material adverse change" clause as well as the treatment of Unocal management, employees and the pension plan.

People close to the situation warned that CNOOC had not taken a final decision on whether to comply with Unocal's requests.

The paper said Yang Hua, CNOOC's chief financial officer, returned to Beijing this week to report to senior executives, led by Fu Chengyu, chairman and chief executive, on the talks.

But the paper said insiders appeared confident.

"These issues could be wrapped up by next week, and if CNOOC complies, a decision could come within a couple of weeks," said a person close to the situation.

The paper said that winning the backing of Unocal's board, which could make a decision next week, is crucial if CNOOC is to persuade the US company's shareholders to reject Chevron's cash-and-shares offer in a vote scheduled for Aug 10.

Failure to get the board's support would force CNOOC to choose between walking away and raising the bid, it said.

(1 usd = 8.3 yuan)

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