Shell-BG merger hits snag as Australia holds off on approving deal

Australia’s competition watchdog will delay its decision on the proposed merger of Shell and BG Group until November, while it assesses concerns that the tie-up could lead to higher domestic gas prices in Eastern Australia.

The regulator has received a large number of comments from those who are concerned that the merger between the London-listed companies would lead Shell’s Arrow Energy to sell its gas into BG’s Queensland liquefied natural gas (LNG) plant for export, and in turn this could threaten gas supplies for domestic use.

The deal is being studied as part of a wider review of the gas market on the east coast.

Wholesale gas prices in Australia are forecast to double over the next two years as a significant amount supplies are committed to exports, according to Australia & New Zealand Banking Group in a July report.

Shell’s takeover of BG Group has so far been cleared by the US authorities and the Brazilian regulator, but it still needs approval in Australia and China to go ahead.

Shell said it was confident the deal would be completed in early 2016.