Arrow Energy is to reject a $3 billion joint takeover offer from Royal Dutch Shell and PetroChina as too low, analysts believe.

Analysts' comments have triggered speculation the proposal will be rejected, and that the Australian firm's decision could prompt the bidders to return with a higher, hostile offer.

“A rejection by Arrow could precipitate a formal bid by Shell and PetroChina, which will allow shareholders to make a decision,” said John Young, energy analyst at Wilson HTM Investment Group.

“My view is that they will need to raise their offer to the high $5-$6 [a share] range for the deal to go through.”

Shell and PetroChina last week offered A$4.45 in cash for each Arrow share, plus a share in a new Arrow entity, in a first foray by a Chinese company into Australia's burgeoning coal-seam gas sector.

An Arrow spokesman said discussions were continuing and the firm would not comment on speculation. PetroChina was not immediately available to comment.

Shares in Arrow, which has a market value of A$3.8 billion, were up 1% at A$5.25, outpacing a 0.7% drop on the broader share index.

Analysts said the offer values Arrow's proven and probable reserves at A$0.88 a gigajoule, much lower than an average A$1.88 a gigajoule for 20 offers in Australia since 2005.