Australia Halts $70 Billion Shell BG Group Merger

Published at 12:10PM - 17/09/15

The mega merger of oil and gas super majors Royal Dutch Shell and BG Group, has hit the buffers, after Australian regulators raise concerns.

The Australian Competition and Consumer Commission (ACCC), has told Shell and BG that it feels the merger, worth US$70 billion, could harm Australia’s domestic supplies of gas.

The merger, agreed back in April this year, has faced scrutiny by a host of international anti corruption and competition regulators, namely Brazil, the US, Europe and Australia. 

The deal has already passed scrutiny from Brazil, the US and what most commentators believed to be the biggest hurdle- Europe.

Australian LNG

The ACCC, cited the possibility of the merger decreasing the amount of natural gas suppled to the Australian domestic market, causing both shortages and price rises.

The concerns centre around the BG Group owned LNG plant on Australia’s east coast, the Queensland Curtis LNG project (QCLNG), which came on stream late last year and started shipping gas across Asia earlier this year.

BG Groups QCLNG Plant

BG Groups QCLNG Plant

The acquisition of the QCLNG is one of the major driving forces behind Shells US$70 billion merger with BG.

However, Shell also holds a 50% stake in an Australian based Arrow Energy. The Queensland based firm is believed to be sitting on the largest untapped gas reserves in Eastern Australia.

Arrow had been looking to build its own LNG plant, but this project has been dogged by delays and has currently stalled.

The ACCC feels that if the merger goes ahead, Shell will priorities getting gas to the QCLNG plant for export as opposed to developing the Arrow plans to supply the domestic market.

ACCC Chairman, Rod Sims, said: “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.”

A Shell Spokesperson said, “Shell can confirm that Australia’s Competition and Consumer Commission (ACCC) has informed the company of its decision to conduct a Phase 2 review of its recommended combination with BG.

“The Shell-BG combination is a sign of confidence in the Australian economy and Shell looks forward to investing more in the Queensland resource sector.

“Shell and BG will continue to work closely with the ACCC to complete the regulatory review. The combination remains on track for completion in early 2016.”