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ACCC will not oppose Shell’s takeover of BG Group

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LNG Industry,

The Australian Competition and Consumer Commission (ACCC) has announced that it will not stand in the way of Shell’s proposed acquisition of BG Group. The ACCC had taken into consideration whether or not the proposal would lead to a reduced supply of gas, or reduced competition to supply gas, to domestic customers by aligning Shell’s Arrow Energy interests with BG’s LNG infrastructure in Queensland, Australia.

Throughout the review, the ACCC received a significant amount of submissions from market participants, voicing their concerns over the proposed acquisition.

Rod Sims, the Chairman of the ACCC, said: “The ACCC’s view is that the proposed acquisition would be unlikely to substantially lessen competition in the wholesale natural gas market, in either Queensland or eastern Australia more broadly.

“The ACCC concluded that as Arrow is not currently focussed 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.

“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.

“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.”

Some parties encouraged the ACCC to approve the proposed acquisition, but only with undertakings from mergers to make gas domestically available. These market participants considered that the proposed acquisition may offer a ‘route to market’, which would allow Arrow’s gas to be developed at a faster rate.

Sims said: “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.

“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.”

Edited from press release by David Rowlands

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