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Royal Dutch Shell and PetroChina convinced Arrow Energy to accept an increased $3.1 billion bid, giving resource-hungry China its first bite of Australia’s coal-seam gas industry. 

The offer, which will need approval from Australian regulators and Arrow’s shareholders, highlights the growing importance of CSG as a key energy source in the United States and a major target for multinationals in Australia. 

In addition to 4.70 Australian dollars a share in cash, Arrow investors will retain ownership of some domestic and international assets which will be spun out into a new entity to be called Dart Energy. 

The Shell-Petrochina joint venture will integrate Arrow’s Australian assets with Shell’s existing CSG assets and Shell’s site for a planned liquefied natural gas plant on Curtis Island in Queensland, the companies said on Monday. 

Shell and PetroChina will each own 50 percent of the gas produced by the LNG plant and the Anglo-Dutch oil major said it was likely to sell its gas to China. 

Analysts said it made strategic sense for Shell to boost its Australian CSG assets, as it has said such assets are key to its growth plans. The price offered for Arrow was also below what some analysts expected the joint venture would have to pay. 

However, with Shell declining to say how much each side was contributing to the bid, or what valuation would be attached to Shell’s assets, analysts said it was unclear exactly how good a deal it was for Europe’s largest oil company by market value. 

Arrow’s agreement followed two weeks of talks after Shell and PetroChina made an initial offer that investors considered too low. “I can tell you, it was not an easy discussion,” Shell Australia chairman, Russell Caplan, said. 

Reuters