(Reuters) - Anadarko Petroleum Corp, the U.S. oil and gas exploration and production company that agreed this month to sell itself to Chevron Corp for $33 billion, decided on Sunday to begin negotiations to sell itself to Occidental Petroleum Corp instead, according to people familiar with the matter.

FILE PHOTO: The unstaffed lobby of the North Dakota regional headquarters of oil producer Occidental Petroleum Corp is seen in Dickinson, North Dakota in this October 14, 2015. REUTERS/Ernest Scheyder

The bidding war for Anadarko underscores the value of its assets in the lucrative Permian Basin of West Texas and New Mexico. The vast shale field holds oil and gas deposits that can produce supplies for decades using low-cost drilling techniques.

Anadarko’s board of directors has decided that Occidental’s $38 billion cash-and-stock bid could lead to a deal that would be superior to the one it has with Chevron, the sources said. Without such a formal determination, Anadarko’s contract with Chevron prevented it from engaging with Occidental.

Anadarko will now kick off negotiations with Occidental to see if it can finalize a deal, the sources said.

There is no certainty that Occidental, which was vying for Anadarko before Chevron clinched its deal, will be able to secure its own deal, the sources said.

If it does, Chevron will be given a chance to match the new deal. If Chevron finally loses out to Occidental, Anadarko would have to pay Chevron a $1 billion break-up fee, according to the terms of their agreement.

The sources asked not to be identified because the matter is confidential.

Anadarko and Occidental did not immediately respond to requests for comment. Chevron spokesman Kent Robertson declined any immediate comment.

The acquisition of Anadarko would add nearly a quarter million acres to Occidental’s holdings in the Permian shale basin, and double its global oil and gas production to 1.4 million barrels of oil equivalent per day.

Occidental unveiled its bid for Anadarko last Wednesday, offering to pay for it half in cash and half with its own shares. Chevron’s deal with Anadarko was structured as 25 percent cash and 75 percent stock.

Chevron declined to say on Friday during its earnings call how it would respond if Anadarko’s board determined Occidental’s proposal the better of the two deals. Chevron’s finance chief Pierre Breber, however, said the company had the ability to put more cash into its deal.

A key hurdle that Occidental has to overcome in its negotiations with Anadarko is that its proposed deal is contingent on Occidental shareholders voting to approve it. A deal with Chevron offers more certainty to Anadarko in that regard, because Chevron shareholders will not be given a vote.

Anadarko shareholders will be given a vote on the sale of the company, be it with Occidental or Chevron.