Shell’s planned merger with BG has hit a speed bump. The Australian Competition and Consumer Commission (ACCC) has warned the merged entity could lead to higher gas prices on the east coast.

Both Shell – via its 50% holding in Arrow Energy – and BG – which holds a majority stake in the Queensland Curtis Liquefied Natural Gas project (QCLNG) – are key players in the emerging coal seam gas industry.

“The ACCC is concerned that, by aligning Shell’s interest in Arrow Energy with BG’s LNG facilities in Queensland, the proposed acquisition may change Shell’s incentives such that it will prioritise supply to BG’s LNG facilities over competing gas users,” the ACCC’s chairman Rod Sims said in a statement.

“As a result, Shell could choose to direct more – and possibly all – of Arrow’s large gas reserves towards meeting BG’s contracts to supply LNG export markets.

“This would remove some or all of Arrow’s gas from the domestic market.

“If the proposed acquisition resulted in less supply of gas to the domestic market, therefore, this could substantially lessen competition to supply domestic gas users and lead to higher domestic prices and more restrictive contractual terms.”

The merger has been given the go ahead in many other important regions.