ACCC anxious about higher gas prices

MELBOURNE, Australia-Australia’s antitrust regulator has again deferred a decision on Royal Dutch Shell PLC’s planned takeover of BG Group PLC, raising concerns about competition and the supply of natural gas to the domestic market.

The Australian Competition and Consumer Commission (ACCC) said a large number of market participants had expressed concern that the takeover might lead Shell’s Arrow Energy to sell its gas into BG’s Queensland Curtis liquefied natural gas plant (QCLNG) for export.

“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”, he added.

Arrow Energy, a joint venture between Shell and PetroChina, now has the largest quantity of uncommitted gas reserves in eastern Australia, producing supplies from the Surat and Bowen Basins. The competition regulator has invited further submissions on the Shell deal and plans to make a final decision November 12. As a result, Shell may be incentivized to supply BG’s facilities with Arrow’s vast…

The surge in demand has combined with delays in the development of NSW coal seam gas resources to drive up prices well beyond historical levels of $3 to $4 a gigajoule. The ACCC has been examining the proposal since June 11.

The regulator has been studying the Shell agreement amid a broader review of the gas market on the east coast. It has already been approved by the European Commission and authorities in the United States and Brazil, where BG Group has its most promising assets in giant offshore fields in the Santos Basin.

The regulator released a statement of issues on the deal on Thursday and has called for more submissions from the market by a new October 8 deadline, before a final ruling is made the following month.

Rod Sims, chairman of the commission, said in a copy of a speech to be given in Sydney.

The BG acquisition is “unlikely to increase the ability or incentive of Shell to foreclose supply of gas to rival LNG plants because the merged entity would only supply a small share of the global LNG market”, the watchdog said.

“We see no immediate red flags for the Shell-BG deal”, the bank said in a note.

“The impact of the deal on the local gas market in the U.S. , Brazil and Europe is nothing like it is in Australia and so there’s greater scrutiny”, Mr Richard Griffith, an oil analyst at brokerage Canaccord Genuity in London, said by phone.