Unocal Corp.’s board of directors has endorsed an increased takeover offer of $17 billion from Chevron Corp., potentially ending the fierce bidding war by China’s National Offshore Oil Co.(CNOOC) for the U.S. oil and natural gas company.

Chevron raised its offer by $2 per share to about $63 per share for a total bid of $17 billion prior to a meeting of Unocal’s board Tuesday. A competitive, higher cash counterbid of $18.5 billion for the El Segundo, CA-based Unocal, the ninth largest oil and gas company based on reserves, has been made by CNOOC, which represents a premium of $1.5 billion over the latest Chevron bid.

Unocal’s board said it recommended that the company’s stockholders vote in favor of adopting the Chevron’s amended takeover bid at a special meeting scheduled for Aug. 10.

The new Chevron offer is structured as 40% cash and 60% stock, providing an overall value of $63.01 per share of Unocal common stock based on the closing price of Chevron stock on July 19.

Under the terms of the agreement, Unocal stockholders may elect to receive, for each share of Unocal stock, either $69 in cash, 1.03 shares of Chevron stock, or a combination of $27.60 in cash and 0.618 of a share of Chevron common stock, with the all-cash and all-stock elections subject to proration. In aggregate, Chevron will issue approximately 168 million shares of Chevron stock and pay about $7.5 billion in cash.

“The question now will be whether CNOOC will raise its offer. The company’s board has authorized its management to raise its offer by as much as two dollars a share, which would keep the spread between the Chevron and CNOOC bids roughly the same as it was before…If CNOOC doesn’t raise the bid, it may be because it views the political risks as too hard to overcome or that the Unocal board is stacked against it,” The Wall Street Journal reported Wednesday.

CNOOC previously had signaled that it would raise its bid to $69 a share if Unocal would publicly support a merger with the Chinese energy company, the newspaper said.

Unocal’s natural gas production in North America last year was 577 MMcf/d, and its reported proved oil and gas reserves were 556 million barrels of oil equivalent.

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