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SHELL and PetroChina are offering $2.96b for Australian unconventional gas producer Arrow Energy.

The deal looks to bolster the energy China needs to continue growing its economy, and secures additional resource to feed Shell’s proposed 16m t/y LNG production plant at Gladstone port in Queensland, where Arrow’s coal bed methane assets are focussed.

The offer is a 28% premium on Arrow’s closing shareprice on 5 March, the last day before an offer was made public – an announcement that propelled its shares up by more than 40%. Shell bought 30% of Arrow’s assets and 10% of its international operations for more than $700m two years ago. The latest bid isn’t interested in Arrow international assets, which would be packaged up and sold off though an initial public offering on either the Hong Kong or Singapore stock exchange.

The deal faces regulatory hurdles in Australia after its Foreign Investment Review Board set out new guidelines in August warning foreign investors to bid for no more than a 15% share in major domestic projects.

The Arrow board has recommended its shareholders take no action while it considers the proposal.