June 24 (Bloomberg) -- Unocal Corp. said it received permission from Chevron Corp. to negotiate with CNOOC Ltd., advancing the prospects of the Chinese oil company's rival $18.5 billion cash bid for Unocal.

Unocal may have talks with CNOOC, China's largest offshore oil and natural-gas producer, until the U.S. company's shareholders vote on Chevron's cash and shares takeover plan, El Segundo, California-based Unocal said in a statement. The date of the shareholder meeting has not been set.

Chevron said its April 4 pact to buy Unocal for cash and stock, worth $16.45 billion yesterday, remains in effect, and Unocal said its board's recommendation in favor of the deal still stands. Chevron, which said it is close to winning regulatory approval for its agreement to buy Unocal Corp., may be forced to increase its bid, investors said.

``It is pretty likely we'll see a better bid from Chevron,'' John Leiviska, who helps manage $17 billion at Advantus Capital Management Inc. in St. Paul, Minnesota, including Unocal and Chevron shares, said yesterday. ``The Chinese will go as far as they have to go and bid very aggressively to win this.''

CNOOC's Chief Financial Officer Yang Hua today said he is in the meeting and declined to comment. The Beijing-based company said yesterday it is proposing to engage in ``confidential, preliminary discussions'' with Unocal.

To contact the reporter on this story: Loretta Ng in Hong Kong at lng13@bloomberg.net

Last Updated: June 23, 2005 20:55 EDT