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Origin said in a statement that it had not yet considered the proposal and that “discussions between the parties will take place”, though the talks “may or may not lead to an agreed transaction”.

The company is Australia's only vertically integrated energy group, with oil and gas production assets accounting for about a quarter of its revenues. Crucially for BG, it also has extensive undeveloped coal-seam methane assets in the Bowen and Surat Basins in Queensland.

BG has already been operative in Australia this year, forming a joint venture with Queensland Gas Company (QGC) to develop an A$8 billion LNG project on the coast of the eastern state. The first shipments are to take place by 2013.

Analysts said that Origin's coal-seam methane could provide gas for a second plant.

Frank Chapman, chief executive of BG, said during a visit to Australia last month: “Our LNG supplies today are concentrated around the Atlantic basin. We have for some time been looking for a source of equity supply in the Asia-Pacific basin.”

He said that coal-seam gas appeared to be a viable alternative to conventional gas supplies.

BG provides about half the LNG imported into the US and has stakes in LNG projects in Egypt and Nigeria. But with demand expanding quickly in Asia, analysts say that BG’s strategy is to gain its own sources of supply close to those markets.

Origin said that production for the quarter to March had been up 17 per cent on the same quarter a year earlier, but that sales volumes and sales revenues had risen only 2 per cent.

“I think BG are the best placed to really crystallise the value of Origin's coal seam methane fields (in Queensland) through their joint venture with QGC in the LNG plant,” an analyst who would not be named said.

“Prior to this, it is difficult for people to say that Origin is worth $14 because even though they have the reserves and could publish the reserves they have in Queensland, they didn’t have the right channels to market it. That would explain why BG is prepared to pay that price for them.”

Citigroup upgraded its recommendation on Origin to “buy” from “neutral” on Tuesday and said that the group had strong earnings momentum in the near term and a solid longer-term growth outlook.

This is the second approach for Origin, which supplies gas and electricity to more than 3 million homes in the domestic market, New Zealand and elsewhere in the South Pacific.

Last year it rejected a proposed A$14 billion merger with AGL Energy, Australia’s biggest power retailer, saying that it offered little upside.

In February, Origin forecast an increase in its June year net profit of at least 15 per cent from last year’s underlying net profit of A$370 million.

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