The excitement followed London-headquartered broker Cazenove outlining the benefits of a possible merger.

The analyst argued that the combination would create a gas industry leader that would carry much lower risk than if the two companies continue to invest independently in exploration outside their usual territories.

Shell, which owns 34% of Woodside, would benefit both by owning a better quality investment and sending a clear signal that it did not intend to bid for either company, Cazenove said.

Even though the broker emphasised it was considering such a merger only as a concept, investors got excited.

But BG continued its share buyback program yesterday, indicating quite clearly that it could not be in merger talks.

Rumours of Woodside mergers, or takeovers of the company, surface regularly but the LNG producer has been considered off-limits to foreign corporations ever since Australian Treasurer Peter Costello ruled that a $10 billion bid by Shell in 2001 was against the national interest.

Following the abortive Shell bid, Woodside had discussions with BHP Billiton about a possible merger.

But this would have required demerging BHP’s oil and gas division and nothing came of this move.

About the same time, Woodside also spoke to Santos about a merger, but the latter’s 15% shareholding cap, imposed by the South Australian Government, made this too difficult.

However, the SA Government is now reviewing the cap and it seems likely to be removed. And a Woodside-Santos merger will not fail a national interest test.