As Unocal (UCL) directors consider whether to recommend CNOOC's (CEO) $18.5 billion bid to its shareholders, some fund managers and analysts said they expect rival Chevron to come back to the table with a higher offer.

One analyst said a third party -- global major Royal Dutch/Shell -- may even jump in to bid for Unocal So far, the state-run Chinese oil firm's all-cash bid looks superior to Chevron's (CVX) $16 billion-plus stock-and-cash offer, some analysts and investment bankers said. But if political objections to the CNOOC bid fade, that could force Chevron to increase its bet.

"I think most people are expecting Chevron to raise its bid. Probably timing-wise, they would wait to see the CNOOC/Unocal discussions," said a top investment banker in Asia with a global bank.

"I don't think Chevron is going to come out with a revised bid immediately. It might be a few days, it might be a couple of weeks," said the banker, who is not involved in any discussion on the takeover of Unocal.

CNOOC has begun campaigning for its bid in New York, urging Unocal's directors to accept the offer. Unocal's board, before its meeting with CNOOC this week, said it continued to recommend that its shareholders accept Chevron's offer, which is structured as 75 percent in stock and the rest in cash.

Chevron says its offer carries higher certainty of being approved by U.S. regulators.

The daring attempt to achieve China's largest overseas acquisition has fueled political concerns in Washington over the potential threat to U.S. energy security. It also comes amid U.S. discontent over the United States's $160 billion trade deficit with China and jitters about China's growing military power.

Even so, some Unocal shareholders, analysts and U.S. corporate executives say the concerns are overblown or warn that a rejection could cause an equally harmful backlash to U.S. interests.

"The only way the (U.S.) government should get involved is if it (CNOOC offer) somehow threatens national security, if it's a company that makes defense electronics. If not, stay out of it -- it's a global economy," said Hersh Cohen, chief investment officer at Citigroup Asset Management.

A bidding war is exactly what Unocal shareholders want.

Phil Davidson, fund manager at American Century Investments, which owned about 2.3 million shares in Unocal as of March 31, said he would prefer if Chevron came back with a stronger offer.

Davidson said that if Chevron raised its offer sufficiently, "it's theirs."

Chevron does not need to match CNOOC's offer, because a Chevron-Unocal tie-up would have the advantage of not becoming bogged down in regulatory issues. Judging by Unocal's share price near $65.79, the market is discounting the value of CNOOC's offer of $67 per share due to regulatory uncertainty.

If Chevron sweetens its bid, CNOOC may follow suit because Unocal is the only firm with massive oil and gas assets in Asia that is up for grabs. CNOOC would try its best not to miss an opportunity to become a pan-Asia energy giant.

"They are determined to win," said Liu Yang, managing director of Atlantis Investment. For CNOOC, Unocal is "a rare commodity worth hoarding," she said, using a Chinese idiom.

CNOOC's offer is largely backed by loans from its state-owned parent and a Chinese state bank. Those financing arrangements also added to concerns raised by some U.S. lawmakers who contend that CNOOC is benefiting from Chinese government subsidies.

The likelihood of a more aggressive CNOOC offer will certainly worry CNOOC's minority shareholders.

"There is a chance CNOOC will raise its bid because they are keen... But they will need to do the math to see whether another counter-offer is justified or not," said Stella Lau, fund manager at East Asia Asset Management, which holds CNOOC shares.

U.S.-based Oppenheimer & Co. Inc. analyst Fadel Gheit said in a research note on Monday that Shell is a possible candidate because it, like Chevron, is struggling to boost reserves.

"Although we think Shell is eyeing a much bigger company for acquisition, we don't rule out the company making two, or even three smaller acquisitions, beginning with Unocal, which would fit nicely with Shell's asset portfolio," Gheit wrote.

Some analysts have said Washington would risk irking the Chinese government by preventing CNOOC from buying Unocal. That could result in retaliation from Beijing, which could bar U.S. companies from buying corporate stakes in China, according to their thinking.

A U.S. rejection could also undermine the U.S. image as an advocate of free-market capitalism.

One potential consequence, if the CNOOC bid were rejected following a political review, might affect Chevron itself, analysts say.

Chevron operates a $8.25 billion Gorgon gas project in Australia, and it hopes China will be a significant customer.

"Chevron walks a difficult tight-rope between wanting to derail CNOOC's bid without angering the Chinese, which Chevron hopes will buy its Asian gas," wrote Deutsche Bank analysts Paul Sankey and Jay Saunders in a research note.