BG Group’s hopes of completing an $11 billion (£6.2bn) bid for one of Australia’s biggest energy companies has been dealt a severe blow after its target struck a lucrative contract with America’s ConocoPhilips.

Origin Energy, which is trying to fend off an A$15.50 per share offer from BG Group, said Conoco was paying $8 billion for a half share of all its coal seam gas assets.

The two will develop a project in Queensland with a view to developing a liquefied natural gas (LNG) export terminal primarily targeting Asian markets.

Shares in Origin leapt 28 per cent to a record high of A$19.99, taking the stock well above BG Group’s bid price.

Origin invited proposals on how to best exploit its reserves of coal seam gas in a bid to find a white knight after BG Group made its initial offer four months ago. The company believes its shares should be valued at nearly A$30.

Grant King, Origin’s managing director, said the venture would “transform” the company and give it the “financial strength to fund a decade of growth."

“This strengthened financial position will enable Origin to fund both its future growth and undertake capital management initiatives for the benefit of shareholders.”

BG Group, formerly part of the British Gas empire, wants to buy Origin to further its global LNG ambitions. LNG is likely to become more critical for Western markets as traditional supplies, such as the North Sea, dry up.

Under LNG, natural gas is condensed and liquefied, allowing it to be transported long distances by ship. Once the transport arrives at its destination, re-gasification takes place.

ConocoPhilips already operates a 3.2 million tonnes a year LNG plant in Darwin, northern Australia. Its deal with Origin would create a second export hub.

BG Group's shares rose 4.4 per cent to £10.79, reflecting the wider surge by the London stock market after last night's bailout of US mortgage lenders Fannie Mae and Freddie Mac.

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