BG Bid For Origin Vaporized By Conoco

A takeover attempt by the U.K.’s BG Group for Australian gas producer Origin Energy vanished into thin air Tuesday as the British company conceded that it had been one-upped by Origin's deal, announced Monday, with U.S. energy giant ConocoPhillips.

Origin Energy (other-otc: OGFGF - news - people )’s $8.0 billion joint venture with ConocoPhillips (nyse: COP - news - people ) to extract Australian natural gas for the Asian market vaporized the $11.8 billion hostile offer from BG Group (other-otc: BRGYY - news - people ). Origin’s board had viewed the BG offer as inadequate and had sought to make BG sweeten its bid.

BG Group said it will let its offer of 15.50 Australian dollars ($12.47) a share for Origin Energy (see "Third Time For BG Group May Not Be The Charm") "lapse" at the Sept. 26 expiration date. Origin’s board had recommended that shareholders reject BG’s offer, pointing to an independent assessment of the firm as worth almost twice that much per share.

ConocoPhillips will cough up $4.8 billion upfront to take a 50% stake in a venture with Origin Energy to build two liquefied natural gas production facilities in Queensland, the companies said Monday. The plants will have a combined annual capacity of 7 million metric tons and are expected to go online by 2014. ConocoPhillips will make further cash injections at various stages of development. The joint venture awaits approval from Australia’s Foreign Investment Review Board.

ConocoPhillips has offered a big premium in order to gain a foothold in Australia’s 8.1 million acres of coal bed methane deposits. Coal seam gas production extracts naturally occurring methane gas from underground coal reserves. The methane gas is then converted to liquefied natural gas for transport. The natural gas sector has gained on high oil prices in recent months, with natural gas futures rising 54% this year on the New York Mercantile Exchange.

The most lucrative markets in Asia for liquefied natural gas are Japan and Korea, according to Morgan Stanley analyst Stuart Baker. With gas supplies from Indonesia and other areas contracting, some energy multinationals are flocking to Australia, whose natural gas industry was virtually nonexistent five years ago, he said. Malaysia’s state energy firm Petronas has staked $2.5 billion in a coal seam gas project with Australia’s Santos (nasdaq: STOSY - news - people ).

In trading in Sydney Tuesday, Origin Energy shares finished the day down 25 Australian cents (20 cents), or 1.4%, at 17.40 Australian dollars ($14.13). In New York, ConocoPhillips shares closed down 74 cents, or 1.0%, to $74.69 Monday. In London, BG Group shares closed 60 pence ($1.05), or 5.8%, higher, at 10.93 pounds ($19.18) Monday.