Origin eyes joint venture with Conoco to fend off BG

By Fayen Wong and Tom Bergin

PERTH/LONDON (Reuters) - Australia's Origin Energy (ORG.AX) struck a joint venture deal with U.S.-based ConocoPhillips (COP.N) and promised an extra shareholder payout, a move that could either defeat an $11 billion (6.24 billion pound) bid from BG Group (BG.L) or force a higher offer.

Origin and Conoco said in statements on Monday that Conoco would contribute up to $8 billion toward a 50-50 joint venture that will develop the massive coal-seam gas (CSG) assets and build a liquefied natural gas (LNG) project.

BG declined to comment on the deal.

The tie-up could force the UK gas producer to raise its A$15.50 per share bid, which was aimed at growing BG's Asia-Pacific LNG production arm to feed its booming Asian LNG sales business, dealers said.

Some analysts said BG could afford to pay up to A$18/share but others said the Conoco deal could scupper the bid altogether.

"We believe it will be difficult for BG to match the Conoco deal," Citigroup's David Thomas said in a research note. "We therefore believe the most likely outcome now is for BG to withdraw."

Origin also said it would pay a dividend of 25 Australian cents on completion of the joint venture transaction, doubling the 2008 dividend, and commence a A$1.275 billion buy-back of shares.

Its shares rose nearly 28 percent to a record high of A$19.99 on news of the venture.