Shell targeting Arrow Energy with £2bn joint bid

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Shell is thought to be paying half of the bid price, which it is offering alongside PetroChina, the biggest oil and gas company in China.

The pair offered Arrow investors A$4.45 a share, plus a cut in a separate company owning Arrow's overseas assets in areas including China, India and Vietnam.

Arrow had previously set out plans to float its international arm via an initial public offering at some point this year, and its suitors backed that move, eyeing a flotation either in Singapore or Hong Kong.

The deal is the latest evidence of growing international interest in Australia's coal-bed gas resources, which are being tapped for export to Asia.

Two years ago, Shell spent up to A$776 million (£465 million) buying a 30% stake in some of Arrow's assets. It has since grown to become Queensland's biggest player in the coal-bed natural gas industry.

Arrow is vying to be the first firm to dispatch shipments to Asia, but faces competition from rival projects run by BG Group and an Australian-Malaysian tie-up. The first delivery is not expected to be until 2012.

China is aiming to triple its gas consumption to about 10% of its total energy requirements in the next 10 years.

Arrow today told investors: "At this stage, the board recommends shareholders take no action in relation to their Arrow shares."