SYDNEY: The $12 billion bid by BG Group of Britain for Origin Energy of Australia has put the Australian government, which must sign off on any deal, in a political and diplomatic quandary. BG has made a nonbinding cash offer for Origin that values the company at 14.70 Australian dollars, or $13.80, a share, a 40 percent premium to its Tuesday closing price. Origin had yet to formally respond to the approach, issuing nothing more than a noncommittal acknowledgment to the Australian Securities Exchange. "Origin has not yet considered the proposal," the company said in its letter. "Discussions between the parties will take place and shareholders will be advised of the outcome. These discussions may or may not lead to an agreed transaction." But any deal will have to be signed by both the Australian Competition and Consumer Commission and the Foreign Investment Review Board. Origin is one of the most successful Australian energy companies. It controls 23 percent of the domestic gas market in eastern Australia, the country's most populous and politically important region. BG is one of the world's largest companies in the energy export market, and it is expanding rapidly, particularly in the Asia-Pacific region. Earlier this year it bought 10 percent of the Queensland Gas Company, and the two have agreed to spend 8 billion Australian dollars on building a gas liquefaction plant to feed the export market. BG recently signed a deal to supply Singapore with up to three million tons of gas a year for 20 years. Origin's reserves would make a welcome addition to the BG portfolio. But Origin sells its gas to domestic customers at approximately a third of the price it could command on the export market. Many analysts expect that if BG wins control of Origin, the price of its gas sales to domestic customers will increase to something closer to the international rate, and that could provoke a political backlash. "Energy is one of the main competitive advantages we have as a country," said Roman Domanski of the Energy Users Association of Australia, which brings together industrial gas consumers. Domanski said that Australian industry was already trying to prepare for the increased costs that would come from a carbon trading program that the government was planning, and any extra energy costs would be unwelcome. Increased prices would also come as an undesirable shock to the three million domestic customers of Origin, many of whom are already struggling with the central bank's policy of keeping interest rates high. If BG makes a firm offer, it could pose a dilemma for the government, which could block the bid if it deemed it against the national interest. Given that a takeover by BG could lead to a significant rise in the price of gas for domestic customers, the Labor Party government of Kevin Rudd will be caught between its commitment to open markets and the risk of provoking discontent in a significant part of its core constituency. "The government welcomes foreign investment in Australia," Rudd told local radio Thursday. "It's good for the economy and good for jobs. But any significant foreign investment, including this one, has to satisfy the government's overall national interest test, and they will be applied by the Treasurer in his evaluation of this proposal." But there are also international implications. There is rising concern in Australia that China is preparing to make major investments in the country's mining and energy sectors. There are fears that giving a green light to BG could prompt a surge of Chinese takeovers, a prospect that makes many observers uncomfortable. "In the current circumstances, there will be recriminations for the government, and more importantly the country, if the floodgates are opened," the business commentator, Michael West, wrote in the Sydney Morning Herald.