By Carla Mozee, MarketWatch

LONDON (MarketWatch) -- European stocks surpassed a record high Wednesday, with the energy sector thrust in the spotlight after Royal Dutch Shell PLC agreed to take over BG Group PLC in the largest energy industry deal this year.

The Stoxx Europe 600 was up 0.3% to 405.56, just above its all-time closing high of 405.50 hit on March 6, 2000, according to FactSet data. The move brings the pan-European index's year-to-date gain to 18%, highlighting the impact of the European Central Bank's EUR1.1 trillion asset-purchase program.

BG (BRGYY) surged more than 40% at the open of trade after news Shell has agreed to buy the energy producer for GBP47 billion ($69.6 billion) in cash and shares ( BG confirmed it was in advanced talks with Shell following a late Tuesday report from The Wall Street Journal. London-listed BG shares intraday were up 37% at GBP12.52 ($18.65). Shell (RDSB) shares were down 2.6%.

Talk about consolidation in the energy industry has ramped up as a result of the slide in oil prices.

"We see decent strategic merit in this deal," which could offer growth in Brazil and other benefits for Shell, said BNP Paribas in a note. "We also think there may be some positive read across for BP as well, which has been also been mentioned as a potential target for one of the U.S. majors."

Shares of British oil major BP PLC (BP) were higher by 3.3%.

The Stoxx 600's oil and gas group on Wednesday leapt 5%, as a number of energy-related shares were among the strongest advancers in European trade. Producer Tullow Oil PLC jumped 9.9%, Portugal's Galp Energia climbed 8.8% and Sweden's Lundin Petroleum AB tacked on 8.9%. Stock in Tenaris SA (TS), which makes steel pipes used by energy companies, rose 4.9%.

On the country benchmarks, the U.K.'s FTSE 100 , which is heavily weighted with energy shares, rose 0.5% to 6,995.49. France's CAC 40 gained 0.3% to 5,166.61, but Germany's DAX 30 turned 0.2% lower to 12,102.43.

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