PERTH (miningweekly.com) – The Australian Competition and Consumer Commission (ACCC) has expressed concern over the proposed acquisition of ASX-listed BG Group by Royal Dutch Shell.

Earlier this year, Shell launched a $70-billion takeover for liquefied natural gas (LNG) producer BG.

The companies’ combined deep-water and integrated gas businesses could potentially each generate between $15-billion and $20-billion in yearly cash flow, while upstream and downstream engines could potentially further generate a combined $15-billion to $20-billion in yearly cash flow.

Shell currently has a 50% interest in Queensland coal-seam gas producer Arrow Energy, whose gas reserves constitute the largest uncontracted gas reserves in eastern Australia, and that were not aligned with an LNG project.

The ACCC said in a statement this week that it was concerned that by aligning Shell’s interest in Arrow Energy with BG’s LNG facilities in Queensland, the proposed acquisition could change Shell’s incentives in such a way that it would prioritise supply to BG’s LNG facilities over competing gas users.

“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. This would remove some or all of Arrow’s gas from the domestic market,” ACCC chairperson 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,” Sims said.

To date, the ACCC has received a large number of submissions from market participants concerned about the competition effects of the proposed acquisition.

The watchdog has invited further market submissions and has now deferred its final decision on the transaction until November 12.