Value of Unocal reserves may be as slippery to grasp as oil.

IN a few short months, Unocal Corp. has become one of the most sought-after properties in the oil industry, if rumors floated by "sources close to" various oil companies can be believed.

ChevronTexaco Corp., Chinese National Offshore Oil Co., and most recently Italian oil company Eni SpA have all reportedly expressed interest in the California oil company. (Neither Unocal nor the named suitors had confirmed any talks last week.)

Most of the discussion around Unocal's attractiveness has focused on its natural gas and oil reserves off the coasts of Thailand, Indonesia, Myanmar and Bangladesh.

"Unocal has more natural gas in Asia than any company of its size," said Fadel Gheit, oil analyst with Oppenheimer & Co. But there is some debate over just how valuable those assets are.

"'People make the mistake of looking for a short cut to value that," Gheit said. "It's like saying 'I own a 10,000-square-foot house in California.' The question is, 'Where is it?' That affects its value."

Since reserves are one measure of an oil company's worth, there is incentive for executives to err on the side of optimism. In the past year-and-a-half, Royal Dutch/Shell Group and ChevronTexaco have had to restate bloated oil reserve estimates.

While there are rules governing the definition of "proved" and "unproved" reserves, the Securities and Exchange Commission doesn't have the staff to count inventories or evaluate geological data, according to SEC spokesman John Heine. "The filer bears responsibility for the accuracy and completeness of the information supplied," he said.

That may be one reason why it's taking so long for a bid for Unocal to materialize.

"For years people just assumed proven reserves were just like inventory," said Matt Simmons, chairman of Simmons & Co. International, an energy investment bank. "But it turns out the established process of trying to ascertain what proven reserves are is still an art versus a science."

On paper, Unocal has 981 million proved barrels-of-oil equivalent of natural gas in Asia--more than half its overall reserves--but 58 percent are undeveloped.

Valuing such data requires a complicated series of assumptions put together by geologists, engineers and petrophysicists, Simmons said.

"The uncertainties lie in figuring out how much oil and gas is in the ground and how much you can get out of the ground," said Steve Enger, oil analyst with Petrie Parkman & Co.

Other factors also must be taken into account: energy prices, transportation costs and even regime changes--and all are present in Southeast Asia, Enger said.

Unocal's natural gas assets used to be less valuable because certain Asian markets do not have pipelines installed, Enger said. But right now Unocal is producing and selling gas in Thailand.

However, in Indonesia and Myanmar, where gas is in excess supply, there are few local markets. One solution would be to bring it to markets such as Japan or North America where there is demand, but the gas can only be shipped if it is liquefied for tanker transport.

In Indonesia, the company is competing with other producers to sell gas to the lone liquid natural gas processing facility.

"Liquefying natural gas technology has been around for the last 20 years, but only in the last five years has it suddenly become more important--as natural gas becomes a fuel of great interest," said Warren Kourt, consulting professor of petrochemical engineering with Stanford University.