Unocal Corporation’s acceptance of a sweetened offer from Chevron Corporation appears to have increased the odds that Unocal shareholders will approve the deal on August 10, but some believe it’s too early to discount Chinese suitor Cnooc Ltd. from the game.

By increasing its bid by $2 to $63.01 a share, or $17.1 billion, and boosting the cash portion to 40% from 25%, Chevron narrowed the gap between its offer and Cnooc’s $67-a-share bid and presumably gave Unocal shareholders more comfort in accepting the lower offer.

An analyst at Oppenheimer & Co, Fadel Gheit, said while Chevron’s revised offer is still not enough to win Unocal shareholders’ votes on August 10, there’s no point in Chevron putting all its financial might on the table this early in the bidding war.

He sees the offer as just the start of a prolonged bidding war that will push Unocal’s stock higher and compel higher competing bids for the El Segundo, Calif., oil and natural gas producer.

“The Chinese have made it clear this is a must-win situation, not only because of strategic needs, but also because their reputation – the Chinese government’s reputation – is on the line,” he said.

Getting the green light from American authorities isn’t as insurmountable as many people think, he said. “I think the politicians are blowing hot air in Washington, and I still believe Cnooc’s [deal] would be approved, although the government would attach certain demands in return from China.”

The promised fight by a gaggle of congressmen who have raised the specter of national security concerns, based on the strategic importance of future access to oil reserves, threatens to drag out the regulatory process for a Cnooc deal, possibly for nine months or longer, whereas Chevron already has its approvals in the bag.

Mr. Gheit predicted Cnooc would either raise its offer by a minimum of $2 a share in order to at least match Chevron’s increase or provide Unocal shareholders with a financial safety net, in the event Cnooc’s deal is kept from closing. He added that he expects a move by Cnooc within the next three days.

Late last week, the Chinese company agreed to create an escrow account of $2.5 billion to be distributed to Unocal shareholders if a deal fails to close.

Cnooc also confirmed it would pay Chevron a breakup fee of $500 million if it succeeds in buying Unocal. But the escrow guarantee needs to be much stronger to convince Unocal’s board to change its recommendation to shareholders, Mr. Gheit said.