The transaction was cleared as it will not grant Shell market power in oil and gas exploration, LNG liquefaction or LNG wholesale supply. Shell will also not be able to prevent competitors from using its gas infrastructure in the North Sea.
The European Commission has approved under the EU Merger Regulation the acquisition of BG Group by Royal Dutch Shell. The Commission concluded that the takeover would not lead to Shell benefiting from market power in a number of markets, namely oil and gas exploration, the liquefaction of gas and the wholesale supply of liquefied natural gas (LNG). Moreover, the Commission found that Shell would be unable to shut out its competitors from access to its liquefaction facilities that supply LNG into the European Economic Area (EEA) or from gas transportation and processing infrastructure in the North Sea.
The Commission focused its investigation on the markets where the activities of Shell and BG Group overlap, namely in the exploration for oil and gas reserves, the supply of natural gas and the liquefaction and supply of LNG.
The Commission found that after the transaction the merged entity’s market share would remain limited in the exploration for oil and gas reserves, the liquefaction of LNG and the wholesale supply of LNG. Moreover, a number of strong competitors would remain active in these markets after the merger. The Commission concluded that the takeover would not allow Shell to influence prices and that these markets would remain competitive after the transaction.
Moreover, the Commission found that Shell and BG Group would be unlikely to prevent competitors from accessing some of Shell’s LNG liquefaction facilities used to supply LNG into the EEA or from its natural gas transportation and processing infrastructure in the North Sea. This is mainly because significant additional liquefaction capacity is being built and will come on-stream in the near future, while significant spare oil and gas transport and processing capacity exists in the North Sea region.
The Commission therefore concluded that the transaction would not raise competition concerns. The transaction was notified to the Commission on 29 July 2015.
Companies and Products
Royal Dutch Shell is a global group of energy and petrochemical companies with business activities including oil and gas exploration, production and marketing; manufacturing, marketing and shipping of oil products and chemicals, and; renewable energy products.
BG Group has two principal business areas, the upstream gas business segment, which covers exploration and production activities plus liquefaction operations associated with integrated LNG projects, and the LNG shipping and marketing business.
Merger control rules and procedures
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it. The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days (35 working days if commitments are offered) to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II). The transaction was examined under the normal merger review procedure.