The Australian Competition and Consumer Commission voiced its concerns over issues on the proposed $70 billion acquisition by Royal Dutch Shell of BG Group.
ACCC’s Statement of Issues seeks industry views and more information on the competition issues that have arisen in the regulator’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.
He added that 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 said it has received a large number of submissions from market participants concerned about the competition effects of the proposed acquisition.
It called for further submissions from the market in response to the Statement of Issues by October 8. As a result, the ACCC’s final decision will be deferred until 12 November 2015.
Image: BG Group