THE battle to secure Queensland's coal seam gas reserves has intensified.

BG Group has launched a hostile $796 million bid for Pure Energy Resources.

The British gas giant's $6.40 a share cash offer trumps a friendly bid from rival Arrow Energy, which has offered $2.70 cash and 1.21 of its shares for each Pure share.

BG acquired a 10 per cent stake in Pure over the weekend through a bookbuild and signalled its intention to block the Arrow bid, which is conditional on 90 per cent acceptance.

BG Group is already a serious player in the CSG space, having acquired Queensland Gas Company through a $5.3 billion takeover last year after losing out in a hostile attempt to purchase Origin Energy for $14 billion.

QGC senior vice-president David Maxwell said Pure's acreage in Queensland complemented its assets, and it was logical to investigate developing the reserves with its own portfolio.

Pure also has assets in Tasmania, but Mr Maxwell said that interest would be reviewed if its takeover bid succeeded.

"The next stage in Pure's development requires a lot of money and knowledge of the CSG sector," Mr Maxwell said.

"Acquiring Pure would add a lot of value to our company."

Mr Maxwell said there was a lot of potential in Queensland's CSG sector, and the move on Pure was prompted by its focus on developing its Queensland Curtis liquefied natural gas (LNG) project. Several large international players have been eyeing CSG assets in Australia, with plans to develop LNG plants intensifying, resulting in consolidation in the sector. Origin has formed an alliance with US oil major ConocoPhillips, and Santos and Malaysia's Petronas have joined forces to develop LNG projects.

Arrow Energy teamed up with Royal Dutch Shell to use CSG to supply an LNG plant at Gladstone being built by Liquefied Natural Gas Ltd, of which Arrow is a shareholder.

When Arrow made a play for Pure late last year, which was recommended by Pure's board, it was revealed that the move would give Arrow enough gas reserves to underpin two of the small $1.5 billion CSG-to-LNG plants that LNG Ltd was planning to build in Gladstone. In a note on BG's announcement, Deutsche Bank said the British company's bid might force Shell to move on Arrow in order to maintain a sizeable presence in Queensland's CSG space.

It also tipped Arrow and Santos as potential targets if BG's appetite for reserves continued.

Arrow, which also has a 20 per cent stake in Pure, said it would discuss the latest development with Pure's directors.

"We have presented a compelling offer to Pure shareholders, including Arrow scrip, which is significantly undervalued, particularly if you use the BG offer for Pure as a valuation guide," Arrow managing director Nick Davies said.

Pure said it was working through the information on the new offer and would respond accordingly. Mr Maxwell said it would be interesting to see how the directors of Pure would respond to the offer, considering it was a superior offer and at a higher premium than that offered by Arrow.

BG said its offer represented a 19 per cent premium to the implied value of Arrow's offer at the close of trade Friday.

"Our offer conveys full and fair value to Pure shareholders for assets which complement QGC's acreage," Mr Maxwell said.

Pure Energy shares were placed in a trading halt and last traded at $5.28, while Arrow gained 26c, or 11 per cent, to close at $2.48.