Adam Creighton, 09 November 2015

Local manufacturers are urging Australia’s competition watchdog to impose conditions on oil and gas giant Shell’s proposed takeover of BG Group to stop local firms being shut out of the bidding process for its vast Queensland gas reserves.

A week before the ACCC’s expected decision on the proposed $91 billion takeover, Mark Chellew, chairman of Manufacturing Australia, has called on the regulator to require an ‘‘open-tender process’’ for sale of the gas to emerge from Shell’s Arrow join venture, or for a certain percentage of gas to be reserved for domestic bidders.

“If the Arrow joint venture gas is locked away, or if it is diverted straight to export without the domestic market even having an opportunity to bid for it, then all of the efforts to improve the competitiveness and transparency of the east coast gas market will be significantly undermined,” he said. The Arrow LNG project, jointly owned by Shell and China’s PetroChina, entails rights to the largest quantity of uncommitted gas reserves in eastern Australia.

While overseas regulators (except in China) have approved what would be the biggest global oil merger in a decade, the ACCC is concerned the tie-up could further disrupt Australia’s domestic market, where manufacturers such as BlueScope, CSR and Incitec Pivot have already faced significant price increases and difficulties in securing long-term gas contracts.

“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,” said ACCC chairman Rod Sims in September.

Australia is on track to export more than $60bn a year worth of LNG by 2018 and become the world’s largest exporter, as global gas markets integrate on the back of rapid growth in global demand primarily from India, China and the Middle East.

“This has been a slow moving train wreck coming down the line for domestic manufacturing. We’ve already seen plants close and investments go offshore because of the problems in the domestic gas market,” Mr Chellew said, noting that six parties controlled 90 per cent of Australia’s gas reserves.

The ACCC’s final decision on the takeover is expected by ­November 19.

Extracted in full from The Australian.

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