Bridget Carter & Gretchen Friemann, 06 November 2015

Energy giant Shell is expected to offload interests in its Arrow Energy joint venture with AGL Energy once it receives approval from the competition watchdog to proceed with its $101 billion global merger with British Gas.

It has been eight months since the international mega deal was announced and the Australian Competition and Consumer Commission is yet to offer official approval for Shell to take control of BG’s Australian assets.

The widely held belief is that once the takeover is finalised, some east coast projects owned by Shell will be sold.

Market sources believe the Arrow Energy stake in the Moranbah Gas Project in Queensland, which is operated by Arrow and is one of the largest gas projects in Australia, will be one.

The other will be the neighbouring ATP1103, which is owned by Arrow, but which AGL Energy has first right of purchase.

The projects supply gas to the Moranbah Power Station, as well as mineral refining facilities in north Queensland. AGL did not comment yesterday.

Shell and BG, once part of British Gas, bought into the Australian CSG boom in the past decade, with BG paying $5bn for Queensland Gas Company in 2008 and Shell and Chinese government-owned PetroChina paying $3.5bn for Arrow Energy in 2010.

Moranbah has long-term offtake contracts with customers including the listed chemicals and explosives maker Incitec Pivot.

However, the projects are expected to sell for less than $100m, given that they are loss making, sources said. Part of the problem, according to market analysts, is that Arrow is a high-cost operator.

Sources have said that Shell would next have backing from PetroChina to exit the asset and some question whether it would find a buyer at a time of tough conditions in the oil and gas sector.

The ACCC has suggested that the main potential competition issue arising from the proposed acquisition of BG is related to the impact of the proposed acquisition on the future wholesale supply of gas in eastern Australia.

Meanwhile, some question whether ACCC delays on reaching a finding for the BG-Shell transaction could be linked to the increased volume of mergers and acquisitions coming through that need competition clearance. There are some fears that delays for clearance could deter other potential investors in Australia.

Elsewhere, it is understood that Texas-based ConocoPhillips is selling its interests in the Greater Sunrise fields, about 450km northwest of Darwin in the Northern Territory.

One challenge facing Sunrise has been the current government-to-government arbitration between East Timor and Australia regarding sea bed boundaries.

Extracted in full from The Australian.