Cnooc, China’s largest offshore oil and gas producer, may bid about $20 billion in cash for Unocal, the eighth biggest American oil company, trumping an offer from Chevron, sources familiar with its plans said.

The Beijing-based company will offer about $71.50 a share, 10% higher than a bid made by San Ramon, Calif.-based Chevron on April 2, the people said, asking not to be identified. It would be the world’s second-largest cash offer for a company in at least six years, data compiled by Bloomberg show.

China needs overseas energy assets to help fuel its $1.65 trillion annual economy, the world’s sixth-largest and fastest-growing major market. Paying with borrowed funds would cost Cnooc about $1.2 billion in yearly interest payments, the same as Unocal’s net income in 2004.

“It’s a relatively high price to pay,” said Marc Faber, who oversees about $300 million as managing director of Hong Kong-based Marc Faber. “The Chinese are willing to pay top dollar for oil reserves, and the purchase may not look so stupid in the long term.”

The company may use some of its $3 billion in cash and borrow the remainder from banks to finance the bid, the sources said. Cnooc was expected to seek approval for a bid from its eight-member board as soon as yesterday, they said.

In March, the company’s independent directors delayed a vote on the issue and requested more information to address concerns an acquisition carried too much risk in terms of strategy and funding, they said.

Chevron is offering about $62 a share in cash and stock for El Segundo, Calif.-based Unocal. The acquisition would boost its daily output by about 16%.

Cnooc needs to move quickly on its bid for Unocal because the U.S. Securities and Exchange Commission is poised to approve the disclosure documents on Chevron’s bid. The Federal Trade Commission approved Chevron’s takeover plan on June 10.

The Chinese company’s bid would have to be approved by American regulators amid concern about control of Unocal’s energy assets shifting to China. Two Republican congressmen, Richard Pombo and Duncan Hunter, on June 17 wrote to President Bush seeking a review of any bid by Cnooc for Unocal on national-security concerns, the Asian Wall Street Journal reported Sunday.

Cnooc indicated it would finance the acquisition through bank debt and available cash, and attached proposal letters from potential financing sources.

The record cash offer for a company was made by Unilever as part of its $24 billion takeover of Bestfoods in 2000.

Cnooc would also have to pay Chevron a $500 million breakup fee, according to a regulatory filing made by Chevron.

Cnooc is about 71% owned by state controlled China National Offshore Oil Corporation.

Goldman Sachs and JPMorgan are advising Cnooc on the transaction.