Australia further delays $70-bn Shell's acquisition plan of BG

Royal Dutch Shell's $70-billion takeover of BG Group has been delayed as Australia's competition watchdog has postponed its final decision till 19 November. Australian Competition and Consumer Commission (ACCC) cited reasons that market participants expressed their concerns about the takeover that would impact the gas supply competition in eastern Australia. However, Shell hopes to complete the acquisition deal by early 2016. 

The decision on the takeover bid was also deferred in September. If Shell's Arrow Energy sells its gas into BG Group's Queensland Curtis will impact the market competition as it'll result in more exports hurting the domestic market's requirements.

ACCC has sought more time to consider the proposed the acquisition deal in detail.  Shell in its email statement said: "We see this as an indication of the thorough process being undertaken by the ACCC. The takeover of BG remained on track for completion in early 2016."The EU, the US and Brazilian anti-trust regulators have already cleared Shell's takeover bid.

Earlier in September, ACCC said the proposed takeover would impact the east coast and Queensland gas users and will result in the increase of prices. Arrow Energy and Queensland Curtis Liquefied Natural Gas project are dominant players in the emerging coal seam gas industry. 

Shell holds 50 percent stake in Arrow Energy and BG holds the majority stake in $20-bn Queensland Curtis. Arrow has reserves in Surat and Bowen Basins accounting for largest uncontracted gas resources in Eastern Australia.

Adding to this, Eastern Australia has a limited number of potential suppliers for the domestic market. After the acquisition, Shell can prioritize supply to LNG, due to BG Group's interest in the QCLNG project. The acquisition will enable Shell to regulate gas supply in the domestic market. 

Hence, the proposed acquisition will significantly reduce the market competition in either the Queensland or eastern Australian gas market. However, Shell has been saying that it would supply gas for the domestic market. 

Shell's offer includes $70billion cash and shares to the UK-based BG Group, which is engaged in deepwater activities with a focus on LNG. If the deal concludes, it will be the largest acquisition deal since Exxon and Mobil merger in 1998. After the acquisition deal, it'll add 25 percent more to the Shell's proven oil and gas reserves and 20 percent to production. 

ACCC is examining other deals including Halliburton's $35 billion takeover of Baker Hughes Inc and a $6.5 billion takeover of freight firm Asciano Ltd by Canada's Brookfield Asset Management. Shell's deepwater assets in Brazil and Australia will also enhance after the acquisition deal. The asset sales may rise to $30billion during 2016-18.