BG Group was dealt a surprise blow yesterday when Origin Energy, the leading player in the fast-growing Australian coal-seam gas sector, spurned an improved A$13.6 billion (£6.6 billion) takeover offer. The British gas producer said that it was reviewing its options after Origin cited the increased value of its reserves of methane in rejecting A$15.50 cash per share.

Shares in the Australian company closed up almost 7 per cent as Origin talked up the prospect of a bidding war, saying in a statement that it has had “many approaches … from third parties”. Analysts said at least A$16 a share, against the earlier offer of A$14.70, might be enough to win.

Kevin McCann, the chairman, said that the company would pursue all options, including joint ventures or a potential demerger, after an independent valuation had resulted in a 121 per cent increase in its proved, probable and possible coal-seam gas reserves. He said: “Given that the core value driver here is CSG (coal-seam gas), any of those options that relate to it remain on the table and will be continually carefully reviewed by the board.”

Origin said that the value of these reserves was highlighted by a deal announced on Thursday in which Malaysia’s Petronas will invest US$2.5 billion (£1.27 billion) in a liquefied natural gas (LNG) project to be supplied from neighouring coal-seam gas reserves in Queensland. Grant King, the chief executive, said the deal with Santos, the country’s No 3 oil and gas producer, set a new benchmark that valued Origin’s coal-seam gas assets alone at more than A$16 billion.

BG said that it had been surprised by the break-off in talks after Origin sent a letter on Wednesday stating that the revised offer should be put to shareholders. Until yesterday the two companies had been engaged in putting the “final touches to the agreement”. The proposal represented a premium of 48 per cent above the Origin share price at the close of trading before the initial approach on April 29.

Campbell McComb, the investment director at Armytage Private, the fund manager, which holds Origin shares, said that the raised offer was reasonable. He said: “A$15.50 is fair value or a bit better for Origin. The directors in rejecting it have set themselves up with a fair bit of work to justify why they rejected it.”

Speaking before Origin’s announcement, Richard Griffith, an analyst at Evolution Securities, said that an aborted deal would be unlikely to result in a regional withdrawal. He said: “Failure to close the deal would undermine the scale of the position they are trying to build and would force a rethink on establishing a source of gas supply in the region.”

BG wants a source of LNG in Asia to strengthen its position in the region, where it is weaker than in Europe and America. Last month it was chosen by the Singapore Government to supply its domestic demand. Under the terms of the deal, BG will be shipping up to 3 million tonnes of LNG into the city-state each year.

Yesterday shares in Arrow Energy, Australia’s number four producer of coal-seam gas, were still halted as it worked on an agreement to sell an interest in its projects. Shell was rumoured to be the likely partner.