Announcing the consultation at the second day of the Eastern Australian Energy Market Outlook in Sydney today, ACCC chairman Rod Sims said the watchdog is concerned the deal would remove all of Arrow Energy’s gas from the domestic gas market.
“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,”? Mr Sims said.
“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.”
BG owns the $24 billion Queensland Curtis LNG project. Shell and PetroChina meanwhile are equal joint venture partners in the Arrow Energy operation in Surat and Bowen Basins. Arrow Energy delivers almost 20 per cent of Queensland’s natural gas from five CSG fields.
The major concern is that if Shell acquires major interest in BG’s Curtis LNG project, domestic supplies from Arrow will be shifted offshore.
“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,”? Mr Sims warned.
“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.”?
The ACCC states that it has already received a large number of submissions from market participants concerned about the competition effects of the proposed acquisition.
Submissions to the ACCC close 8 October 2015. A final decision on the Shell-BG deal is now expected 12 November 2015.