Shell’s proposed takeover of Britain’s BG Group is inching closer to completion after Australia’s Competition and Consumer Commission (ACCC) determined that the deal would be “unlikely to substantially lessen competition in the wholesale natural gas market” in Eastern Australia.
The ACCC said that the proposed acquisition would not reduce the supply of gas, or reduce competition to supply gas, to domestic customers by aligning Shell’s interest in Arrow Energy with BG’s LNG facilities in Queensland.
“The ACCC concluded that as Arrow is not currently focused on supplying domestic customers, and appears unlikely to be so in the future, aligning Arrow with an LNG operator would not change competition for the supply of gas to domestic customers,” ACCC Chairman Rod Sims said in a media release.
Mr Sims said that the ACCC also considered whether the proposed transaction would “lessen competition” for the supply of gas to domestic customers by eliminating the potential for competition between Arrow and BG.
“While recognising the current high degree of uncertainty about the future development of the industry, the ACCC considers that BG’s focus is on supplying the QCLNG facilities. A key issue was whether, in the absence of the proposed acquisition, BG and Arrow would both have excess gas above their LNG commitments and whether they would offer that gas to domestic customers,” Mr Sims added.
“However, there is too much uncertainty about the amount and timing of future gas supplies for the ACCC to be satisfied that Arrow and BG would be meaningful competitors in the domestic market in the absence of the acquisition.”
He said that the ACCC received a large number of submissions on the takeover and its impact on the Eastern Australian gas market, with some market participants urging the commission to approve the acquisition, but only with “undertakings from the merger parties” to make gas available domestically.
“In the course of its review, the ACCC considered potential undertakings suggested by interested parties. The ACCC can, however, only accept undertakings where competition concerns arise from the acquisition and it finds that certain undertakings can effectively address those concerns. In this case, the ACCC did not find merger-specific competition concerns that required an undertaking to remedy,” Mr Sims said.
“While it was considered that undertakings were not ultimately necessary, crafting an effective undertaking in this case would have been extremely difficult in any event. The ACCC will continue to consider many of the issues raised by gas users about the structure of the industry as part of its East Coast Gas Inquiry.”
The proposed takeover, which has already been greenlighted by competition authorities in the United States, Brazil, Europe, Japan and Korea, is also conditional on approval by China’s competition authority and Australia’s Foreign Investment Review Board.
If the deal goes through, it would create the world’s largest oil and gas company worth twice the value of British Petroleum and considerably more than US energy giant Chevron.