Oil giant Royal Dutch/Shell Group agreed yesterday to buy Britain's biggest independent explorer, Enterprise Oil, for £3.5 billion sterling (€5.7 billion) cash to catch up with faster-growing rivals.

The world's second-biggest oil firm, which said the deal would boost its upstream interests in the North Sea, is paying 725p for each Enterprise share - a 15 per cent premium to its closing share price ahead of the deal's announcement.

As part of the takeover, Shell will acquire Enterprise's Irish operations, primarily its 45 per cent interest in the Corrib gasfield off the west coast.

Last year, Enterprise and its partners - Marathon and Statoil - declared the Corrib field commercial and said it would cost €650 million to develop.

The field has estimated reserves of one billion cubic feet of gas and Enterprise has already agreed to sell some €470 million worth of gas from Corrib to Bord Gáis Éireann.

As well as the Corrib gas field, Enterprise has exploration interests and in recent years has drilled exploration wells offshore Donegal.

In buying Enterprise Oil, Shell is also assuming £800 million sterling in debt.

Enterprise stock closed yesterday above the offer price at 729p, as investors warmed to the prospect of a rival offer from rumoured suitors such as French-based TotalFinaElf or Norway's Statoil. But analysts and investors cautioned that Shell had offered a full price and its pockets were very deep. "They need some upstream production growth, and the deal is a stepping stone," said Mr Charlie Luke at fund managers Aberdeen Asset's Management, which owns Enterprise stock.

The Anglo-Dutch oil giant has been under pressure from investors to boost its output, where growth has lagged rivals, and oil analysts said it still needed to do more.

"We're getting an attractive, incremental upstream deal for our shareholders at a fair price, an excellent set of assets and strong future cash flow," according to Shell chairman Mr Phil Watts.

"Although the deal is fully priced, there is significant asset overlap between the two companies to make strategic sense," Dresdner Kleinwort Wasserstein said in a research note. "I think Shell is being very generous, but I can see the synergies," said Mr Luke.

Italian oil and gas group Eni had widely been touted as the most likely buyer of Enterprise Oil, having previously bought another UK-based independent, Lasmo Oil. But the company is not now expected to initiate a counterbid.