The Australian Competition and Consumer Commission (ACCC) has cleared the decks for Santos’ $2.15bn acquisition of Quadrant Energy, which is now on the verge of closing following the regulator’s approval.
The competition watchdog said that it will not oppose Santos acquisition of the West Australian-based oil and gas company after finding that the proposed deal unlikely to hurt competition.
Both the companies are engaged in the production and supply of natural gas and crude oil in Western Australia. They also jointly own domestic gas processing facilities and associated fields located at Varanus Island and Devil Creek.
ACCC said that their combination will substantially reduce competition in the supply of gas to domestic customers in Western Australia.
However, as per ACCC Chair Rod Sims, the combined company will still face strong competition from a variety of suppliers, including large LNG producers like Woodside and Chevron.
Sims said: “Most market participants believe the Western Australian domestic gas market is currently oversupplied. While the demand-supply balance could tighten in future, the ACCC considers that the proposed acquisition will not have a significant impact on future gas prices.”
“In Western Australia, gas exporters are required to reserve 15 per cent of their gas for the domestic market, so this should ensure that gas available for domestic customers continues to grow, and from a range of players.”
The competition watchdog said that relevant Western Australian government departments did not express any concerns regarding the proposed Santos acquisition of Quadrant Energy, which was also the case with several market participants.
Following the approval from the ACCC, Santos expects to wrap up the acquisition within weeks. The company had entered into the deal in late August as part of its growth strategy to consolidate on existing infrastructure positions around its core assets.
Quadrant Energy’s assets, which are primarily located in the Carnarvon Basin offshore Western Australia, include natural gas and oil production, near and medium term development, appraisal and exploration assets.
Santos managing director and CEO Kevin Gallagher believes that the acquisition of Quadrant Energy will give increased ownership and operatorship of a high quality portfolio of low cost, long life conventional Western Australian natural gas assets.
Gallagher said: “It is materially value accretive for Santos shareholders and advances Santos’ aim to be Australia’s leading domestic natural gas supplier.”
“We already have very significant growth projects across our five core assets, and Quadrant’s recent oil discovery at Dorado is another exciting opportunity for us.”