The Australian Competition and Consumer Commission has released a Statement of Issues on the proposed acquisition by Royal Dutch Shell (Shell) of BG Group (BG).
The Statement of Issues seeks industry views and more information on the competition issues that have arisen in the ACCC’s review to date.
“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 received a large number of submissions from market participants concerned about the competition effects of the proposed acquisition.
The ACCC invites further submissions from the market in response to the Statement of Issues by 8 October 2015. As a result, the ACCC’s final decision will be deferred until 12 November 2015.
Shell is a global group of energy and petrochemicals companies. Shell currently has a 50% interest in Arrow Energy. Arrow is a Queensland coal seam gas company that produces gas in the Surat and Bowen Basins. Arrow’s gas reserves constitute the largest uncontracted gas reserves in eastern Australia, and are currently not aligned with an LNG project.
BG is an international explorer and producer of oil and gas, and supplier of LNG. 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.
Separate to this merger review, the ACCC is also undertaking the East Coast Gas Inquiry. This 12 month review of the competitiveness and structure of the east Australian gas industry is scheduled to be finalised in April 2016.
Further information on the ACCC’s merger review is available on the public register.
For further information, see East Coast Gas Inquiry.