Russian gas giant Gazprom is eyeing British Gas owner Centrica as a potential takeover target.
Takeover rumours have been swirling around Centrica since 2005
The monopoly admitted Centrica was a "potential acquisition" in an interview with BBC World news.
The possibility of a deal has raised fears over the security of gas supplies in the UK.
The admission came as a Financial Times report said the UK Government had ruled out blocking any potential bid for Centrica from the Russian group.
In an interview with BBC World, the deputy chairman of the Gazprom board, Alexander Medvedev, admitted Centrica was on its list of potential takeover targets.
"Centrica is considered as one of our potential acquisitions but it's very difficult to find a company that is not on our watch list," he said.
He added the group was planning to transform itself from a gas supplier to a "leading energy company" by taking up stakes in European power stations.
"The role of Russian gas will grow, we have enough reserves to supply gas to Europe, the US, China and Korea."
According to the FT, Prime Minister Tony Blair has ruled out the possibility of vetoing any bid for Centrica from the Russian firm as he believes the government must stick to its commitment to open up European markets.
"Whatever the difficulties and challenges of globalisation, the answers will not be found in the stagnant waters of protectionism," the paper quoted Trade Minister Alan Johnson as saying.
Instead the UK's independent competition authorities would look into any such bid a spokesman for the prime minister said.
In February, the UK government said any Gazprom bid would come under "robust scrutiny" following reports it was considering a bid for Centrica.
At the time the government said that the security of UK gas supplies was "paramount".
The Russian firm is estimated to control about a third of the world's gas reserves and supplies almost a quarter of Europe's gas.
In January it sparked a political storm when it cut supplies to Ukraine in a row over prices.
The stoppage had a knock-on effect, hitting supplies to other European countries further down its pipeline.