Origin Energy, fending off an $11 billion hostile bid from Britain’s BG Group, is to spin off its coalbed methane assets into a joint venture with US oil major ConocoPhillips.

Origin and Conoco said in statements that Conoco would contribute up to $8 billion toward a joint venture that will develop the massive coal-seam gas (CSG) assets and build a liquefied natural gas (LNG) project.
A BG spokeswoman declined to comment immediately on the move but analysts said it 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.
Origin’s shares rose nearly 28 per cent to a record high of A$19.99 on news of the venture.
“Obviously, ConocoPhillips’ joining is a positive. I suppose it shows that there is good market out there for what Origin has got,” said Peter Chilton, a fund manager with Constellation Capital Management, which does not own Origin shares.
Conoco said it would pay $5 billion to the joint venture and would carry Origin Energy for their first A$1.15 billion ($950 million) in joint venture expenses. 
It will also pay $500 million into the venture when the partners agree to proceed with each train or phase of the planned four-train CSG to LNG project. 
The deal would take the financial burden of developing the reserves off Origin, whose main business currently is retailing power and gas.
Origin said after the completion of the transaction, it would pay a dividend of 25 Australian cents, doubling the 2008 dividend, and commence a A$1.275 billion buy-back of shares. Conoco said it anticipated booking reserves of around 100 million barrels of oil equivalent from the joint venture in 2008 and the significant size of Origin’s coal fields means it could make substantial additional bookings in the years ahead.
Like most oil majors, the company is struggling to add reserves as the biggest resource holders like Saudi Arabia and Russia restrict access, preferring to have their state oil companies develop their richest fields.
The No 3 US oil company by market value already operates a 3.2 million tonnes a year LNG plant in Australia’s northern city of Darwin.