U.K. gas multinational BG Group PLC (BG.LN) Monday moved another step closer to sealing a A$1.03 billion deal to buy Australian coal seam gas player Pure Energy Resources Ltd. (PES.AU), after rival bidder Arrow Energy Ltd. (AOE.AU) let its offer lapse.

While Arrow did not say what it plans to do with its 20.3% stake in the group, analysts expect the Australian firm - which is backed by Royal Dutch Shell PLC (RDSB.LN) - to sell its stake into BG's offer.

Arrow was not immediately available for comment.

The developments follow a protracted fight for Brisbane-based Pure Energy and come as energy firms look to lock in coal seam gas reserves to feed their planned liquified natural gas plants in Australia's Queensland state, which will meet energy demand from Asia. Up to five LNG processing plants are slated for construction in the small Queensland port town of Gladstone.

Buying Pure Energy will help BG, which also bought Queensland Gas last year after missing out on a deal with Origin Energy Ltd. (ORG.AU), to make a final investment decision on its LNG options. Pure explores and produces CSG in five permits in Queensland state covering about 19,400 square kilometers and a single permit in Tasmania state.

BG, which had a 33% stake in Pure Energy as of March 13, is offering Pure Energy shareholders A$8.25 cash per share if it reaches a 90% stake in the group.

Shell said earlier this month that it would sell its 11% stake in Pure Energy to BG if a higher offer did not emerge.

If Arrow sells its stake into BG's offer, it will collect a near A$200 million cash payout, which would give Arrow more cash to develop its own assets ahead of the planned construction of Liquefied Natural Gas Ltd.'s (LNG.AU) LNG processing plant at Gladstone, which will be fed by Arrow's gas.

Shell also has plans to build an LNG plant in Gladstone and has already bought 30% of Arrow's CSG reserves in the hope of securing supply.

Analysts expect major energy producers will continue to target sources of coal seam gas for their LNG projects.

JPMorgan energy analysts said last month that Shell could potentially consider making a takeover bid for Arrow, but believe Shell might be better off buying another LNG hopeful, Santos Ltd. (STO.AU).

Santos sold a 40% stake in its Gladstone LNG to Malaysia's Petroliam Nasional Bhd. (PET.YY) last year. Origin Energy and ConocoPhillips (COP) also want to build an LNG plant at Gladstone.

Separately Monday, Arrow said its 90% owned subsidiary Arrow Energy International has agreed to a farm-in agreement with Far East Energy Corp. (FEEC) that will give Arrow majority ownership of a coal-seam methane project in China.

Under the deal, subject to regulatory approvals, Arrow will farm-in to a 75.25% operating interest in Far East Energy's 66.5% interest in the Qinnan CBM PSC coal seam methane project located in the Qinshui basin of Shanxi province.

Arrow has also agreed to make a US$10 million convertible note investment in Far East Energy, which if converted will mean Arrow becomes the company's largest shareholder with a 11.5% stake.

"We expect Qinnan to become a material project within the Arrow portfolio, capable of producing 15-20 PJ per annum for at least 15 years," said Arrow Chief Executive Nick Davies.

-By Lyndal McFarland, Dow Jones Newswires; 61-3-9650-0637; lyndal.mcfarland@dowjones.com (Elisabeth Behrmann in Sydney contributed to this article)
Liquefied Natural Gas (ASX:LNG)
Historical Stock Chart
From Jun 2024 to Jul 2024 Click Here for more Liquefied Natural Gas Charts.
Liquefied Natural Gas (ASX:LNG)
Historical Stock Chart
From Jul 2023 to Jul 2024 Click Here for more Liquefied Natural Gas Charts.