Australian Watchdog Concerned over Shell’s BG Takeover

Queensland Curtis LNG

The Australian Competition and Consumer Commission (ACCC) has expressed its concerns over the proposed USD 70 billion Royal Dutch Shell’s takeover of BG Group, saying that it might limit local competition and increase gas prices.

The ACCC said it has received a large number of submissions from market participants concerned about the competition effects of the proposed acquisition.

Shell currently has a 50% interest in Arrow Energy, a Queensland coal seam gas company that produces gas in the Surat and Bowen Basins.

In Australia, BG holds a majority stake in the Queensland Curtis Liquefied Natural Gas project (QCLNG)—an LNG project in Gladstone, Queensland. It also holds interests in natural gas tenements and production facilities in the Surat Basin in Queensland, and exploration rights in the Bowen and Cooper Basins.

“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 prioritise supply to BG’s LNG facilities over competing gas users. As a result, 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,” ACCC Chairman Rod Sims said.

“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.”

The ACCC has invited further submissions from the market in response to the proposed takeover, and as a result, its final decision will be deferred until November 12, 2015.

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