Arrow in A$535m deal for Bow Energy

Royal Dutch Shell and PetroChina have agreed to buy Bow Energy, the Australian gas producer, through their Arrow Energy joint venture, after sweetening their offer by 2 per cent to A$535m (£338m).

The gas produced by Queensland-based Bow Energy will supply Arrow Energy's liquefied natural gas (LNG) operation near Australia's eastern port of Gladstone, where it will be frozen at minus 160 degrees Celsius – resulting in a 600-fold decline in volume – shipped to Asia and heated back to gas form.

Last month, Arrow Energy made an indicative offer for Bow, which advised its shareholders to "take no action" pending further takeover discussions. Yesterday, Bow's board unanimously recommended the improved offer of A$1.52 a share.

Demand for LNG is expected to soar in the coming years, as emerging markets demand increasing quantities of energy, while developed economies such as Germany rethink nuclear power in the wake of the Fukushima meltdown.

The Arrow LNG project, which is expected to begin shipping gas in 2017, is one of four gas-to-LNG projects near Gladstone, as producers look towards Asian markets such as China. Shell and PetroChina acquired Arrow Energy in March last year for $3.2bn, to tap Australia's vast natural resources.