Manufacturing concerns over Shell-BG deal

Some of Australia's biggest manufacturers are concerned that a planned takeover of BG Group by Royal Dutch Shell could potentially worsen what they see as a lack of competition in the eastern Australian gas market. The group has yet to decide whether to make a submission to a review of Shell's bid that will be carried out by Australia's competition watchdog.

Concerns about soaring gas prices in eastern Australia have come to a head with the start of exports from three liquefied natural gas (LNG) plants in Queensland, including BG's Queensland Curtis plant which opened late last year.

A report last year by Deloitte Access Economics found that manufacturing output could shrink by as much as $120 billion by 2021 due to rising gas prices as LNG exports ramped up.

Estimates of gas price rises have been based on assumptions that Australia's LNG exports would fetch $14-16 per gigajoule, although spot LNG in the Asia Pacific is trading at around $7 following the collapse in oil prices.

The Australian Competition and Consumer Commission said on Monday it would begin an inquiry into the competitiveness of wholesale gas prices and the structure of the industry. The review of the gas industry in eastern and southern Australia comes amid concerns raised by big manufacturers that suppliers are hoarding gas for export and offering only limited amounts at high prices for domestic users.

Source: Reuters