Regulatory delays in $70 bn takeover of BG's Australian project could hit gas supply: Shell
03 September 2015
Royal Dutch Shell said it is "working closely" with the Australian competition regulator after the ACCC (ACCC) delayed a critical decision on clearance for the oil major's $70 billion (A$99 billion) takeover of BG Group, signalling it had reservations about the potential impact on gas supply.
The ACCC has decided to put on hold clearance of the project - one of the key approvals still outstanding alongside those from China and the UK - till 17 September.
The Australian and Chinese approvals are widely said to raise most complicated competition issues.
The proposed mega-merger, which was approved by the European Commission yesterday, had raised concerns with industrial energy users along Australia's east coast that the availability and choice of gas supplies would be further restricted. Prices for local consumers were already rising sharply, in part due to so much gas set to be shipped from Queensland to Asia as LNG.
UK-based BG owned the $24 billion Queensland Curtis LNG project, which started exports early this year, even as Shell owned 50 per cent of the Arrow Energy venture, which held the largest chunk of known, undeveloped gas reserves on the east coast.
According to the European Commission, the transaction would not grant Shell market power in oil and gas exploration, the liquefaction of gas and the wholesale supply of liquefied natural gas (LNG).
The acquisition would see Shell emerge as the world's top LNG producer and a major deepwater oil player. It was on track for completion in early 2016, Shell's chief executive, Ben van Beurden, said in a statement.
"Receiving clearance from the European Commission underlines the good progress we are making on the deal," van Beurden said.
The $70 billion deal, announced in April, received approval from Brazil in July but still required mandatory approvals from authorities in Australia and China.
The ACCC had, in June, said it was looking into concerns that a takeover could lead to Shell's Arrow Energy putting its coal seam gas into BG's Queensland Curtis LNG plant for export, which could increase gas prices in the eastern Australian market.
The takeover was cleared by US regulators in June.
In July, Shell announced 6,500 job cuts and deep spending curbs to reassure investors it would be able to finance the BG acquisition as oil prices were expected to stage only a modest recovery in the coming years.