BG Group faces fight for Aussie fuel giant

BG, the international explorer and producer and Britain's third-largest oil and gas company, has been stalking Origin for weeks. Its attempts to woo the company's management have failed, however.

Reports out of China today indicate that Origin's board, rather than agree to talk to BG, could back a break-up and sale of its interests to Citic Resources, an arm of China's state-owned Citic Group.

BG and now Citic want to get their hands on Origin's vast coal seam gas resources to feed a proposed liquified natural gas (LNG) project on the country's east coast to supply the booming market in Asia.

BG was close to a £6.7 billion takeover of Origin as a whole. The Australian company had appeared set to accept terms when it abruptly changed course and urged shareholders to reject the British approach.

It said the BG bid significantly undervalued its resources and Origin issued a statement at that time saying it would "test the value of its assets through a competitive process".

Citic Resources earlier this month became the top shareholder in Australia's Macarthur Coal, its stake rose to 20.4% after global steelmaker Arcelor-Mittal and South Korea's Posco bought into the firm.

It is unclear if Citic would finance such a deal. Its market capitalisation is valued in Hong Kong at £1.2 billion.

The battle for Origin came as the booming worldwide oil and gas prices sent BG profits into the stratosphere.

It reported an 80% surge in operating profits in the half year to £2.83 billion after a second quarter performance which saw profits almost double to £1.43 billion from the equivalent period last year.

Profits from LNG almost quadrupled in the half year to £762 million.

"BG has delivered another strong business performance and continues to create material value through our exploration programme with successful results in Brazil, Algeria, Norway, Trinidad & Tobago and the UK," said BG chief executive Frank Chapman.

BG has attracted huge investor support because of its minority interests in the huge oil finds in the deep water off the coast of Brazil.

Some analysts believe a deal for Origin could also help transform the companies' fortunes.