As the battle between China's CNOOC Ltd. and Chevron Corp. to buy Unocal (UCL) drags on, speculation is emerging that they may eventually agree to carve up the U.S. producer.

By splitting up some of Unocal's assets, such as stakes in its Indonesian natural gas fields, CNOOC (CEO) and Chevron (CVX) can avoid a bidding war that could make Unocal too expensive for either of the bidders, some observers say.

If Chevron at some stage feels it may be pulled into an expensive and drawn-out bidding war, it may find merit in the idea of selling CNOOC part of Unocal's Thai natural gas assets or all of Unocal's gas assets in politically-sensitive Myanmar, according to this line of thinking.

The Unocal assets in Myanmar, Indonesia and Thailand are collectively valued by Deutsche Bank at more than $6 billion. Most analysts see these as the core assets that would be of interest to CNOOC.

Separate from the Unocal assets, Chevron could also sell CNOOC part of its stake in the giant Gorgon liquefied natural gas (search) (LNG) project in Australia for a favorable price, analysts say.

"When both parties find it is becoming too costly to acquire Unocal, they will probably talk to each other," said Lawrence Lau, an analyst at Beijing-backed brokerage BOCI in Hong Kong.

But analysts stress this is just a possible scenario that could emerge at the end of a Unocal acquisition saga. If either side pulls ahead as a clear potential victor, a compromise would not be necessary.

Currently, neither Chevron nor its Chinese rival is likely to initiate such ideas, analysts say. If either of the bidders proposed it now, that would weaken their negotiating positions, which are at a delicate stage.

Both Chevron and state-run CNOOC are going all-out to persuade Unocal shareholders to accept their bids.

"At the moment, they are not going to do anything to change what is on the table," said a senior investment banker at a global bank in Asia, which is not involved in any discussions about the Unocal deal.

CNOOC is scrambling to convince Unocal shareholders that its $18.5 billion, all-cash bid is superior to Chevron's stock-and-cash offer, now valued about 10 percent below CNOOC's, despite the risks or possible delays associated with obtaining U.S. approvals.

CNOOC is also seeking to assure Unocal shareholders that a CNOOC-Unocal tie-up eventually will be approved, asserting a deal would not hurt U.S. energy security because Unocal's assets account for a tiny fraction of U.S. production.

Both sides are enlisting political allies. Chevron is whipping up a sense of uncertainty among Unocal shareholders that the CNOOC bid will not pass government reviews, while noting that its own bid, which is supported by Unocal management, has won nearly all necessary approvals.

For its part, CNOOC has hired lobbyists with political connections to the Republican-dominated Congress and the White House.

Foreign investment in the U.S. energy sector is not new, but some U.S. lawmakers object to CNOOC's bid being largely funded by Chinese government entities, making it difficult for Chevron to compete on financing terms.

CNOOC, which hopes an acquisition of Unocal would help fulfill its ambition to become a regional LNG giant, said on Friday it had asked for a top-level U.S. government panel to review its merger proposal with Unocal.

The clock is ticking. Unocal shareholders are scheduled to vote on Chevron's offer on August 10.

"The CNOOC bid is not off the table yet. It really comes down how they manage the politics in the next couple of weeks," said another banker who is not involved in the process.

If the political climate turns in favor of CNOOC toward the end of this month, Chevron may have to sweeten its offer, observers said.

Another factor that could press Chevron to improve its bid is if Unocal shares continue to trade heavily at the current level of just below $66 each for the next few weeks while Chevron share prices remain largely unchanged, the second banker said.

That would mean many Unocal shareholders would unlikely accept Chevron's present offer, now at just about $60 per Unocal share over CNOOC's offer of $67 a share.

U.S. securities house Fulcrum Global Partners said in a research report on Friday that it still expected Chevron to prevail because "it has politics on its side as a cheap weapon," noting that Chevron may have to improve its bid.

It added: "CNOOC could still try to carve out a partnership or asset swap with Unocal or its successor, paying a premium only for the part the Chinese actually want most. Chevron could still buy Unocal, CNOOC could still buy what it needs."