Australia's Competition Commission Defers Decision on Shell-BG Merger to November

The Australian Competition and Consumer Commission (ACCC) has raised concerns that Shell-BG merger may lead to diversion of gas from domestic to export markets.

“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 Thursday.

ACCC has sought further submissions from the market and deferred final decision on the deal to November 12, 2015.

“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,” Sims added.

In April this year, Shell announced its decision to buy BG Group in a deal close to 47 billion pounds ($70 billion).

If the merger goes through, it will be one of the biggest deals for Shell in almost two decades.