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Shell share price: Australia boss sees no competition issues with BG tie-up

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by Veselin ValchevThursday, 12 Nov 2015

Andrew Smith, chairman of Royal Dutch Shell Plc’s (LON:RDSA) Australian unit said he sees no local competition issues with the oil major’s bid to acquire fellow British energy giant BG Group, in contrast with reservations expressed by the Aussie competition regulator last month.

The Australian Competition and Consumer Commission (ACCC) announced last month that it is delaying its decision on whether to approve the tie-up by a further week to November 19. The regulator’s ruling was originally scheduled for September 12, but in September the commission postponed its decision by two months on competition concerns.

“By aligning Shell’s interest in [Queensland-based] Arrow Energy with BG’s LNG facilities in Queensland, the proposed acquisition may change Shell’s incentives such that it will prioritise supply to BG’s LNG facilities over competing gas users,” the ACCC said at the time.

Smith said yesterday that the merger would, in fact, expedite development of Shell’s Queensland –based Arrow greenfield project, which it jointly owns with PetroChina on a 50-50 basis. The LNG portion of the project was shelved earlier this year, as Shell opted to shift focus to other assets amid the oil price crunch.

The merger would offer “compelling industrial logic” for the two companies to share BG’s Curtis Island LNG infrastructure, Smith noted.

“What the gas market needs is more gas, and in our view the fastest way of getting more gas it to approve the combination, enabling Arrow’s gas to get developed,” Smith said as quoted by The Australian. “We see the combination giving added optionality and incentives for developing the Arrow resource.”

Smith did not say what he thinks the regulator’s ruling next week will be, nor did he discuss whether Shell or the ACCC had suggested any potential remedies to the commission’s concerns.

“It’s been a collaborative and robust process,” he said. “We don’t see that there are competition concerns.”

Earlier this week, Manufacturing Australia chairman Mark Chellew called on the ACCC to impose conditions, including potential domestic reservation on the merger.

Meanwhile, Ian McVeigh, head of governance at Jupiter Fund Management, was quoted as saying earlier this week that Shell’s bid for BG resembles the disastrous purchase of ABN Amro by Royal Bank of Scotland in 2007.

“Hugely expensive moves whose main purpose is to rebalance portfolios have a grim history,” McVeigh pointed out. “This deal is not big enough to do to Shell what ABN did to RBS, but I think it is still highly material.”

Shell’s share price had slipped 1.96 percent to 1,624.00p as of 09:15 GMT today, as compared with a 0.5 percent loss for the FTSE 100.

As of 09:32 GMT, Thursday, 12 November, Royal Dutch Shell Plc ‘A’ share price is 1,624.50p.

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