The Australian government's Foreign Investment Review Board has given its approval for the proposed $70 billion merger between Shell and BG Group, taking the deal another crucial step toward expected completion early next year.
The go-ahead from the FIRB, announced Thursday, was the fourth of five approvals that were pre-conditions to the merger and follows clearances obtained from the Brazilian competition authority, CADE, on July 24, the European Commission on September 2, and the Australian Competition and Consumer Commission on November 19. The only clearance now outstanding is from China's Ministry of Commerce, or MOFCOM.
The Australian competition watchdog's main point of interest in the merger was Shell's 50% stake in Queensland-based coalseam gas company Arrow Energy, which it owns in a joint venture with PetroChina. Arrow's gas is a potential source of future supply for the Queensland Curtis LNG project on Curtis Island in Gladstone, operated by BG's wholly owned subsidiary QGC.
Under the approval from the FIRB, Shell has committed to undertaking a cooperative compliance approach to its taxation arrangements for QGC, the company said. The approach, which is also Shell's preferred position in other jurisdictions, "not only ensures stability and certainty for business and the government but also reduces inefficiencies for all parties and minimizes disputes," the company's Australia chairman Andrew Smith told a Senate committee earlier this year.
QCLNG has a capacity of 8.5 million mt/year at two production trains and started producing earlier this year. There are two other LNG projects on Curtis Island, the Santos-operated Gladstone LNG facility and Origin Energy's Australia Pacific LNG, with capacities of 7.8 million mt/year and 9 million mt/year, respectively.
Arrow has the largest quantity of uncommitted gas reserves in eastern Australia, making it a possible supplier both to the domestic market and the LNG plants. The ACCC gave its approval after taking a view that the Shell-BG merger was unlikely to lessen competition in Australia's wholesale natural gas market.
"The addition of BG's integrated gas assets in Australia to Shell's global portfolio is one of the main strategic drivers behind the recommended combination," Shell CEO Ben van Beurden said in a statement.
"The Shell-BG combination is a sign of Shell's confidence in the Australian economy. It is also a springboard to change Shell into a simpler, more profitable and resilient company," he added. "We remain on track to complete the deal in early 2016."
The proposed merger was announced on April 8, 2015 and is set to boost Shell's proved oil and gas reserves by around 25% and add 20% to its 2014 production of 3.08 million b/d of oil equivalent.
