Cove management said on Wednesday, hours ahead of a deadline for investors to accept Shell's bid, it now backed PTT's 240 pence per share bid, after earlier supporting Shell's 220 pence.

Cove has an 8.5 percent stake in massive gas finds offshore northern Mozambique. Project leader Anadarko Petroleum (APC.N) plans to build large plants to freeze the gas to liquefied natural gas for export in ships.

PTT sees Cove as an opportunity to secure energy resources to help power Thailand's economy. Shell, the leading Western oil group in the LNG business, hoped Cove would be a springboard to a major presence in East Africa.

East Africa is set to become one of the largest gas exporters in the world, executives operating in the region believe, after Anadarko, Eni, Statoil, BG Group and others announced major discoveries across Mozambique and Tanzania.

Shell declined comment on PTT's bid.

Whoever buys Cove will have to pay a capital gains tax to Mozambique, which Shell has estimated at around $200 million, pushing the value of PTT's bid above $2 billion.

Cove shares closed at 224 pence on Tuesday.

Three sources close to the process said around 70 percent of Cove shares were in the hands of risk arbitrage hedge funds, whose strategy is to squeeze every last penny out of a takeover situation.

Such investors will likely now start betting that Shell will make a counterbid.

The PTT bid will require Mozambique government approval, which Shell has already received.

One dealer said this could be a stumbling block for PTT as Maputo may prefer an established LNG operator like Shell to be involved in the project. None of the other partners in the Anadarko led group have experience of launching an LNG plant.

($1 = 0.6330 pound)

(Reporting by Tom Bergin; Editing by Dan Lalor and Mark Potter)

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