The competition watchdog has raised concerns that Royal Dutch Shell's proposed $70 billion takeover of BG Group could lead to higher gas prices.
The Australian Competition and Consumer Commission (ACCC) is concerned that Shell may prioritise supply to BG's LNG facilities in Queensland over competing gas users and direct more of Arrow Energy's large gas reserves towards meeting BG's contracts to supply LNG export markets.
ACCC chairman Rod Sims said if the proposed acquisition resulted in less gas to the domestic market, it could substantially lessen competition to supply domestic gas users and lead to higher domestic prices and more restrictive contractual terms.
"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," Mr Sims said in a statement.
Mr Sims said Arrow had the largest quantity of uncommitted gas reserves in eastern Australia and there was a limited number of other potential suppliers to the domestic market.
Shell has a 50 per cent interest in coal seam gas company Arrow Energy which produces gas in the Surat and Bowen Basins.
The ACCC said it had received a large number of submissions from market participants concerned about the competition effects of the proposed acquisition and it has deferred a final decision on the matter until November 12 and asked for further submissions.
In addition to conducting a review of the proposed merger between BG and Shell, the ACCC is undertaking the East Coast Gas Inquiry which is scheduled to be finalised in April next year.
Global oil and gas producer BG holds a majority stake in the Queensland Curtis Liquefied Natural Gas project (QCLNG) an LNG project in Gladstone.
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