SYDNEY • Energy giant Royal Dutch Shell's plan to buy Britain's BG Group faced its first regulatory hurdle after the Australian competition agency said the deal could reduce natural gas supply to local customers and boost prices.
A decision on granting approval has been delayed until November by the Australian Competition and Consumer Commission (ACCC).
The US$70 billion (S$98 billion) deal announced in April has to be approved by the ACCC as well as Chinese regulators, and would make Shell the world's second-largest oil and gas company.
But ACCC chairman Rod Sims said the takeover could see Shell direct the gas reserves of Australian firm Arrow Energy - which it has a 50 per cent interest in - to BG's liquefied natural gas (LNG) facilities in Queensland state, which might weaken the incentive for Shell to feed gas to the domestic market and boost prices.
The regulator said domestic supply agreements probably would not be sufficient to underpin the development of the Arrow gas resources and the firm would want to obtain "high-volume, long- term contracts", given the significant costs to tap the reserves.
The competition regulator has invited further submissions on the Shell deal and plans to make a final decision on Nov 12.
Shell has won approvals from the United States, Brazil and the European Union. The Australian regulator has been studying the transaction in the context of a broader review of the gas market on the country's east coast.
"The impact of the deal on the local gas market in the US, 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. "The regulator wants more information and Shell is saying there's enough gas to supply the local market and export."
The BG deal is on track to be completed in early 2016, Shell's Australian unit wrote in an e-mailed response to Bloomberg yesterday. The companies will continue to work closely with the regulator on the review, according to the statement.
Shell's B shares, the most widely traded, fell 0.1 per cent to 1,669.50 pence as of 10.20am in London (5.20pm Singapore time). BG rose 0.2 per cent to 1,017.50 pence.
BLOOMBERG, AGENCE FRANCE-PRESSE