The Australian Competition and Consumer Commission has announced that it will not oppose the proposed acquisition of Bow Energy by Arrow Energy Holdings.
“ The ACCC formed the view that the proposed acquisition of Bow Energy would be unlikely to substantially lessen competition in the wholesale supply of gas to domestic users, ” ACCC chairman Rod Sims said.
As Bow Energy is currently not supplying gas to customers, the ACCC focused its assessment on the size of Bow’s reserves and any likely effect on domestic prices from the acquisition of those reserves by Arrow.
The ACCC concluded that Arrow would be unlikely to be able to increase prices for wholesale gas supply to domestic users as a result of the proposed acquisition.
“ The ACCC recognised the concerns amongst domestic gas users about the availability of long term contracts in the short to medium term due to the focus of producers on planned LNG developments at Gladstone. The ACCC also recognised the gas users’ submissions that the proposed acquisition of Bow Energy would remove a potentially significant domestic supplier ,” Mr Sims said.
Broader market developments mean that prices to domestic users may rise as a result of export opportunities available to domestic gas producers following the development of LNG facilities at Gladstone but the ACCC considers that this process is unlikely to be affected by the proposed acquisition.
“ The ACCC considered that, absent the proposed acquisition, Bow Energy would likely have explored a number of options for the development of its reserves, including production of the gas for LNG export, and would be expected to have entered into a supply contract with the purchaser willing to pay the highest price. The ACCC considered that Bow was unlikely to have developed the reserves for domestic supply, if the price received for domestic supply was lower than the effective equivalent price for LNG export ,” Mr Sims said.
“ The ACCC determined that the broader structural impact of the planned LNG developments on the price of gas in southern Queensland and eastern Australia was likely to continue with or without Arrow’s proposed acquisition of Bow Energy. The acquisition of Bow by Arrow is unlikely to have a material impact on these significant market developments. In particular, the trend towards the wholesale price of gas being set against international benchmarks is likely to continue even if Bow Energy were to develop its reserves for domestic supply absent the proposed acquisition by Arrow .”
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LNG World News Staff, December 1, 2011; Image: Arrow