Cnooc, China’s third-largest oil producer, offered to buy Unocal for $18.5 billion in cash, topping the price Chevron agreed to pay for the American oil and gas company.

Cnooc bid $67 cash per Unocal share, or $1.5 billion more than Chevron’s cash and stock plan, the Beijing-based company said in a statement yesterday. Responding to the challenge for Unocal, the San Ramon, Calif.-based Chevron said its offer for the company is “highly likely to close” while Cnooc faces “an extensive” regulatory process in America.

The Chinese government-run company’s chairman, Fu Chengyu, is attempting the nation’s biggest-ever overseas acquisition to secure energy for China with oil trading at record levels in New York. He needs to persuade Unocal’s investors that the premium over Chevron’s agreed offer – about 9.4% – compensates for the risk that the American government will block Cnooc’s bid.

“It’s not the home run I think we were expecting and significantly below the $20 billion” offer that some investors expected, said Michael Cuggino, president of Pacific Heights Asset Management in San Francisco. He helps oversee $360 million in investments including Chevron shares.

Cnooc would assume net debt of $1.6 billion from Unocal, based on disclosures in Chevron’s offer. Cnooc would have to pay a $500 million breakup fee to Chevron, which offered $16.4 billion in a cash-and-stock bid April 4.

Chevron’s cash and stock plan was worth $61.26 a Unocal share, based on Chevron’s $58.27 closing share price Tuesday. Chevron stock fell 51 cents. Shares of Unocal rose 2.2% to a record $64.85 Tuesday, after people familiar with the plan said the Chinese company was considering a $20 billion bid.

Cnooc said it will borrow $16 billion from its parent company and banks to finance the offer. It secured bridging loans totaling $3 billion from Goldman Sachs Group and JPMorgan Chase & Company and $6 billion from Industrial and Commercial Bank of China. Cnooc will borrow $7 billion from its parent, China National Offshore Oil Corporation.

China needs overseas oil and gas fields to meet a shortage of domestic output and help fuel its $1.65 trillion economy, the world’s fastest-growing major market.

The combination would more than double Cnooc’s oil and gas output and increase its reserves by nearly 80% to about 4 billion barrels of oil equivalent.

“There aren’t that many reserves left to buy in the market, and I understand the company plans to buy all the assets and then slash the holdings by half by selling them to other buyers,” Liu Yang, who helps manage $1.8 billion for Atlantis Investment Management in Hong Kong, said yesterday before the bid was announced. “The Asian assets are what the company is after.”

As recently as 1995, China was self-sufficient in oil, producing enough to meet demand. This year, the nation will import 3.3 million barrels a day, or almost one of every two used domestically and more than is pumped each day in Norway, the world’s third-largest oil exporter, according to estimates from the International Energy Agency.

A takeover of Unocal by Cnooc would be nine times bigger than the largest previous overseas acquisition by a China-based company, Lenovo Group’s $1.75 billion purchase of IBM’s PC unit, completed in May.

The Cnooc bid might run into complications in the U.S. Congress.

“There will be issues about foreign holdings of strategic assets,” said Senator Corzine, a New Jersey Democrat.

Chevron’s planned purchase will be made with 75% stock and 25% cash. Unocal stockholders will get 1.03 Chevron shares or $65 in cash for each share. Should more than one-fourth of stockholders opt for cash, the distribution will be prorated.

Chevron said it would issue approximately 210 million Chevron shares and pay about $4.4 billion in cash.

China, Asia’s second-biggest economy, has become the world’s second largest user of oil, after America. Prices have gained 55% in the past year, partly because of China’s soaring demand. On June 20, crude oil for July delivery rose 90 cents, or 1.5%, to $59.37 a barrel on the New York Mercantile Exchange, the highest closing price since trading began in 1983.

Cnooc’s Mr. Fu, who is also chief executive, rose to the top of the company in October 2003. He is also president of China National Offshore Oil, the parent.

“Fu is determined to go for the bid,” Atlantis Investment Management’s Mr. Liu said.

Born in June 1951 in China’s northern province of Heilongjiang, home to the country’s largest oilfield, Daqing, Mr. Fu graduated from Northeast Petroleum Institute in 1975.