BG Group, the global oil and gas producer, is expected to win agreement today for its takeover of Origin Energy, Australia's second biggest energy retailer and a coal seam gas producer, after raising its bid to between A$15 and A$16 a share or A$13 billion (£6.2 billion).

BG offered A$14.70 a share late last month but Grant King, managing director of Origin, has said that the company's coal seam gas resources - methane extracted from coal beds - meant that his company was worth more than this and the pair have been in intensive negotiations since.

Yesterday Origin shares were suspended at A$14.60 and the company said that it expected the negotiations to conclude before the start of trading in Australia tomorrow, with news that would have a material effect on the Origin share price.

BG is chasing Origin's coal seam gas resources to feed a planned A$8 billion LNG plant near Gladstone, in Queensland. Coal seam gas - trapped in cracks in coal beds - has become the latest sought-after energy source as oil reserves run low, since it is relatively clean to burn and cheap to extract.

Queensland's closeness to energy-hungry China also makes Origin attractive to BG, which recently signed its first Asian LNG supply deal - for 20 years.

In yet another sign of the demand for coal bed methane, Petronas of Malaysia agreed to pay $2.51 billion (£1.25 billion) for a 40 per cent stake in a seperate LNG project using coal seam gas at Gladstone being run by Australian gas producer Santos. Analysts were astonished at the size of the $2 billion down payment for an early stage project which has yet to come off the drawing board. "It is a large figure and I think most of us are stunned by the amount of cash upfront," Stuart Baker, analyst at Morgan Stanley, said.

The move would see BG Group move further into the retail energy market of providing power to people's homes. It is thought that BG has no immediate plans to sell the distribution and retail arm of Origin, Australia's second biggest energy retailer. It is also thought to be interested in energy assets in New South Wales, which the state government is considering privatising.

The deal, if it completes, would be the second largest foreign takeover of an Australian company after Mexican cement maker Cemex's A$16.7 billion takeover of Rinker.

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