Upping the stakes in its battle to acquire Australian coal-seam gas producer Pure Energy Resources Ltd, UK's BG Group Plc has raised its offer to A$1.03 billion ($667 million), which is 15 per cent higher than its earlier offer. However, the bid is conditional on getting 90 per cent of the stock.

BG's previous offer was already higher than that of Arrow Energy Ltd, which is Royal Dutch Shell's partner in Australia for coal-seam gas. The company hopes that the latest offer will be a knock-out punch for Arrow and Shell.

The cash offer of A$8.25 a share, a 3.1-per cent increase over the previous offer, is final in the absence of a higher bid, the UK company said in a statement on Friday. BG, Shell and Arrow are seeking more reserves to feed proposed liquefied natural gas projects in Queensland that could meet the rising demand in north Asia for cleaner-burning fuels.

BG's bid is in cash, and has been recommended by Pure's directors, who had already endorsed the previous bid. Even before this increase, Arrow had said it was weighing whether to proceed with its bid, or spend the cash on drilling its own projects.

Matters are complicated by the fact that Arrow already owns about 20 per cent of Pure and Shell owns 11 per cent. BG has built up its stake to 29 per cent after Brisbane-based Pure's independent directors and two key shareholders earlier this week accepted BG's earlier offer.

Shell yesterday reiterated that it was continuing to evaluate all offers for Pure. Pure today repeated in a separate statement that its independent directors unanimously recommend shareholders accept BG's offer in the absence of a higher bid.

Should BG not reach 90 per cent acceptances by the end of the offer, due March 23, Pure's shareholders that have accepted will receive A$8 a share, the earlier, unconditional bid price, it said.

Pure has almost tripled in Sydney trading since Arrow made its first offer in December to gain reserves to supply an LNG plant planned in Gladstone by Liquefied Natural Gas Ltd. The bidding contest with BG underscores the allure of Australia's coal-seam gas industry, which drew more than A$17 billion in investment last year from companies seeking to meet Asian demand for cleaner fuels.

The LNG Ltd venture is one of five rival projects proposed for the central Queensland coast city. BG, Shell, Malaysia's Petroliam Nasional Bhd. and ConocoPhillips are among companies planning to convert gas extracted from coal seams into LNG for export to Asia, the biggest market for the fuel.

"With those shareholder blocks there, irrespective of what happens from here, there will have to be some discussions between shareholders as to how we proceed," Arrow's chief executive, Nick Davies, said on Thursday.

Arrow sold 30 per cent of its coal-seam gas reserves to Shell last year, and the two have already agreed to provide CSG to a smaller-scale LNG plant to be built by LNG Ltd. A final investment decision on that plant is expected late this year or early 2010.

Shell has it own LNG plans, announcing in February that it is studying the feasibility of building an LNG processing facility at Gladstone to be fed by Arrow's reserves. Both BG and Arrow have indicated they don't need to acquire Pure to support their LNG aspirations, with some analysts speculating that BG is only bidding for Pure to spoil Shell's plans.

Pure, however, is considered valuable for its well-developed CSG reserves and their close geographic proximity to Gladstone.