- Australia’s competition watchdog says it will not oppose a merger of Woodside (WPL) and BHP Petroleum International, the energy arm of resources giant BHP (BHP)
- The ACCC says domestic natural gas in WA was the key area of overlap for the two ASX 200-listers, and therefore the main area of concern for the watchdog when examining the merger
- Thanks to WA supply laws ensuring all gas exporters reserve a portion of the production for the domestic market, Woodside would still face adequate competition post-merger
- Woodside and BHP said in August they were targeting the completion of the multi-billion-dollar deal for some time during the second quarter of 2022
- Shares in Woodside are down 0.93 per cent to $21.86 each at 1:50 pm AEDT, while BHP shares are down 0.97 per cent to $40.67
Australia’s competition watchdog today said it would not oppose a merger of Woodside (WPL) and BHP Petroleum International, the energy arm of resources giant BHP (BHP).
The multi-billion-dollar deal, first flagged in August this year, will see Woodside buy out BHP’s energy assets to form an international oil and gas behemoth. Under the deal, BHP would retain a 48 per cent interest in the new company.
The Australian Competition and Consumer Commission (ACCC) said domestic natural gas in WA was the key area of overlap for the two ASX 200-listers, and therefore the main area of concern for the watchdog when examining the merger.
Woodside and BHP customers for liquified natural gas (LNG), liquified petroleum gas (LPG), condensate and oil are either offshore or in areas where the two businesses do not overlap.
ACCC Chair Rod Sims said the merger would combine two of the four largest domestic natural gas suppliers in Western Australia.
Nevertheless, despite a domestic gas market share of 20 per cent, Woodside would still face adequate competition in the WA market, according to Mr Sims.
“We found that post acquisition, Woodside would continue to face competition from a range of suppliers of domestic gas, including major producers Chevron and Santos, and from several other smaller suppliers including Shell and ExxonMobil,” he said.
He added that this boiled down to local gas supply rules governing exporters in WA.
“In Western Australia, gas exporters are required to reserve the equivalent of 15 per cent of their export production for the domestic market, ensuring that domestic gas will continue to be available from Woodside and BHP Petroleum’s export assets, and from a range of other competitors.”
The ACCC said its examination of the proposed merger also found that Woodside would be unlikely to have an incentive to reduce the supply of natural gas from BHP’s Macedon site, given Macedon gas is exclusively supplied to the WA domestic market.
“In addition, the number of competing suppliers in that market are also likely to constrain Woodside from decreasing gas supply,” the ACCC said.
This means the merger deal has passed one of the key regulatory hurdles necessary for completion.
Woodside and BHP said in August they were targeting the completion of the deal for some time during the second quarter of 2022.
Shares in Woodside were down 0.93 per cent to $21.86 each at 1:50 pm AEDT. At the same time, BHP shares were down 0.97 per cent to $40.67.