"There is literally no point to pursue this any further. The dirty Washington politics has basically killed the deal," the South China Morning Post quoted a source "who is familiar with the deal" as saying.

CNOOC did not immediately return the AP's calls before business hours early Friday morning.

Unocal -- based in El Segundo, California -- first agreed to be acquired by Chevron in April for $16.6 billion in cash and stock.

But two months later, Hong Kong-based CNOOC -- 70 percent owned by the Chinese government's China National Offshore Oil Corp -- offered $18.5 billion in cash, or $67 a share, for Unocal.

The bid sparked fears in Congress that the proposed deal presented risks to America's economic and national security.

A flurry of legislation intended to derail CNOOC has been introduced in both houses of Congress.

Last week, Chevron sweetened its offer for Unocal to $17 billion, and Unocal's board recommended shareholders, scheduled to meet on Aug. 19, approve the deal.

From CNN