The US$70 billion Shell and BG Group merger is being delayed until November 2015 by the Australian Competition and Consumer Commission (ACCC) after a warning that the billion dollar takeover could increase Australian gas prices, plus limit domestic gas supplies.
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Image of the QCLNG terminal / BG Group. |
This follows a large number of submissions from market participants to ACCC concerned about the competition effects of the proposed acquisition.
As a result, the ACCC’s final decision has been deferred until November 2015.
Following anti-trust clearance from the US and Brazil, Shell received go-ahead form the European commission early September, while approval from China’s competition authority is still outstanding.
Chairman of ACCC Rod Sims said, “The ACCC is concerned that by aligning Shell’s interest in Arrow Energy with BG’s LNG facilities in Queensland, the proposed acquisition may change Shell’s incentives such that it will prioritize supply to BG’s LNG facilities over competing gas users.
“Therefore, Shell could choose to direct more and possibly all of Arrow’s large gas reserves towards meeting BG’s contracts to supply LNG export markets. This would remove some or all of Arrow’s gas from the domestic market,” he said.
According to Sims, currently, Arrow has the largest quantity of uncommitted gas reserves in eastern Australia and there are a limited number of other potential suppliers to the domestic market.
“If the proposed acquisition resulted in less supply of gas to the domestic market, therefore, this could substantially lessen competition to supply domestic gas users and lead to higher domestic prices and more restrictive contractual terms,” he added.
Arrow is a Queensland-based coal seam gas (CSG) producer owned by Shell and PetroChina in a 50-50 joint venture. The firm’s gas reserves constitute the largest un-contracted gas reserves in eastern Australia, and are currently not aligned with an LNG project.
In Australia, BG holds a majority stake in the Queensland Curtis Liquefied Natural Gas project (QCLNG). The group also has interests in natural gas tenements and production facilities in the Surat basin in Queensland, and exploration rights in the Bowen and Cooper basins.
The Shell-BG combination could potentially increase Shell’s production by 20%, plus provide enhanced positioning in new oil and gas projects, particularly in Australia LNG and Brazil deepwater, Shell said in a statement.
Read more:
Shell, BG merger gets EU clearance
Shell, BG get Brazil green light
Shell, BG merger clears US regulatory hurdle
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