Shell's BG Deal Cleared by Australian Competition Regulator

Updated on
  • Agreement on track to be completed in early 2016, Shell says
  • Shell's plan had faced concerns over gas supply in Australia

Royal Dutch Shell Plc’s $70 billion deal to buy BG Group Plc was cleared by Australia’s competition watchdog despite concerns it could reduce natural-gas supply to local customers and boost prices.

“The proposed acquisition would be unlikely to substantially lessen competition in the wholesale natural gas market,” Rod Sims, chairman of the Australian Competition and Consumer Commission, said in a statement on Thursday.

Shell’s takeover has already won key regulatory approvals from the U.S., the European Union and Brazil. Shell on Thursday called the Australian decision a “major step forward” for the transaction, which still requires clearance from China’s antitrust regulators and is on track to be completed in early 2016.

The Australian regulator’s approval comes amid a broader review of the gas market on the country’s east coast as local buyers such as Incitec Pivot Ltd. express concerns about a supply shortage and surging prices.

The competition watchdog said in September the transaction may weaken the incentive for Shell’s Arrow Energy venture with PetroChina Co. to feed gas to the domestic market. That’s because it would allow Shell to send the Arrow supplies to BG’s Queensland Curtis liquefied natural gas project, which is exporting the fuel to customers in Asia.

“The addition of BG’s integrated gas assets in Australia to Shell’s global portfolio is one of the main strategic drivers behind the recommended combination,” Shell Chief Executive Officer Ben Van Beurden said in an e-mailed statement.

Shell said earlier this month that its takeover of BG will deliver value to investors even in a prolonged oil-industry downturn. Europe’s biggest oil company will save an additional $1 billion in operating costs from the combination with BG, bringing the total estimate of synergies from the deal to $3.5 billion, Shell said at the time.

While some groups wanted Shell and BG to commit to making gas available to the domestic market, “the ACCC did not find merger-specific competition concerns that required an undertaking to remedy,” according to Sims.