sydney gas says has received merger approach

SYDNEY (Reuters) - Australian coal seam methane explorer Sydney Gas Ltd (SGL.AX: Quote, Profile, Research) said on Friday it has received proposals from several parties to accelerate development or pursue a merger, sending its shares higher.

Sydney Gas, one of the largest coal-seam gas producers in Australia, said it has appointed Babc ock & Brown Ltd (BNB.AX: Quote, Profile, Research) and PricewaterhouseCoopers Securities to advise it on a strategic review.

The company, which has a market capitalization of about A$136 million ($124 million), said there was no certainty that the approach would lead to a transaction or new development arrangements.

Shares in Sydney Gas, which have largely stayed flat since the start of the year, jumped as much as 2.6 percent to A$0.40 in early trade, in a broader market that was down over 2 percent.

Sydney Gas, which competes with Queensland Gas Co. (QGC.AX: Quote, Profile, Research) and Sunshine Gas (SHG.AX: Quote, Profile, Research), sold half its gas assets to energy retailer AGL Energy Ltd (AGK.AX: Quote, Profile, Research) in August 2005 and formed a joint venture to supply gas to AGL for 10 years.

The group said on its Web site that total proved and probable reserves at its Camden and Hunter gas ventures in the Sydney Basin was about 82.8 petajoules.

Coal seam gas, also know as coal bed methane, is a natural gas formed as a by-product when organic matter turns to coal. It is a direct fuel source for some power stations, allowing them to emit much less greenhouse gases than coal and oil powered stations.