CELEX: 32018M8771
Language: en
Date: 2018-04-11 00:00:00
Title: Commission Decision of 11/04/2018 declaring a concentration to be compatible with the common market (Case No COMP/M.8771 - TOTAL / ENGIE (PART OF LIQUEFIED NATURAL GAS BUSINESS)) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 11.04.2018
                                                                C(2018) 2238 final
  In the published version of this decision, some
  information has been omitted pursuant to                               PUBLIC VERSION
  Article 17(2) of Council Regulation (EC) No
  139/2004 concerning non-disclosure of
  business secrets and other confidential
  information. The omissions are shown thus
  […]. Where possible the information omitted
  has been replaced by ranges of figures or a
  general description.
                                                                To the notifying party
Subject:             Case M.8771 - Total / Engie (Part of Liquefied Natural Gas Business)
                     Commission decision pursuant to Article 6(1)(b) of Council
                     Regulation No 139/20041 and Article 57 of the Agreement on the
                     European Economic Area2
Dear Sir or Madam,
(1)         On 2 March 2018, the European Commission received notification of a
            proposed concentration pursuant to Article 4 of Council Regulation (EC)
            No 139/20043 by which Total S.A. ("Total" or the "Notifying Party") acquires
            sole control over parts of the liquefied natural gas ("LNG") business of
            Engie S.A. (the "Target Business").4 Total is referred to hereinafter as the
            "Notifying Party" and together with the Target Business as the "Parties".
1.          THE PARTIES
(2)         Total is an international integrated energy producer active globally. Total is
            engaged in every segments of the oil and gas industry, both upstream
1           OJ L 24, 29.1.2004, p. 1 (the 'Merger Regulation'). With effect from 1 December 2009, the
            Treaty on the Functioning of the European Union ('TFEU') has introduced certain changes, such
            as the replacement of 'Community' by 'Union' and 'common market' by 'internal market'. The
            terminology of the TFEU will be used throughout this decision.
2           OJ L 1, 3.1.1994, p. 3 (the 'EEA Agreement').
3           OJ L 24, 29.1.2004, p. 1 (the "Merger Regulation").
4           OJ C 95, 13.3.2018, p. 21.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak---     (hydrocarbon exploration, development and production) and downstream
    (refining, petrochemicals, specialty chemicals, trading and shipping of crude oil
    and petroleum products and marketing), as well as in the renewable energy and
    power generation sectors.
(3) The Target Business comprises a range of LNG assets owned by energy
    company Engie including a portfolio of contracts for the supply, sale and
    regasification of LNG, as well as various equity and contractual rights over
    LNG shipping assets and over gas liquefaction plants, together with associated
    legal entities and relevant personnel in various jurisdictions.
2.  THE OPERATION
(4) On or prior to completion, Engie will undertake a corporate restructuring as a
    result of which the Target Business [structure of the transaction]. On
    completion, Total will acquire ([structure of the transaction]) the entire issued
    share capital of HoldCo (the "Transaction").
3.  THE CONCENTRATION
(5) By means of the Transaction, Total will acquire sole control over the Target
    Business. The Transaction therefore qualifies as a concentration within the
    meaning of Article 3(1)(b) of the Merger Regulation.
4.  EU DIMENSION
(6) The undertakings concerned have a combined aggregate world-wide turnover of
    more than EUR 5 000 million5. Each of them has an EU-wide turnover in excess
    of EUR 250 million, but they do not achieve more than two-thirds of their
    aggregate EU-wide turnover within one and the same Member State. The
    notified operation therefore has an EU dimension.
5.  COMPETITIVE ASSESSMENT
(7) Natural gas originates in oilfields or natural gas fields. After being processed
    and purified at a treatment plan, natural gas can be supplied either in gaseous
    form through pipelines or in liquid form, as LNG. When supplied as LNG,
    natural gas is converted in liquid form in a liquefaction plant, transported in
    specially-designed LNG tankers and then delivered for regasification at a
    receiving terminal at the point of destination or used directly as LNG for certain
    specific applications. Once regasified, LNG is transported in the pipeline
    network where it is mixed with "piped" natural gas.
5   Turnover calculated in accordance with Article 5 of the Merger Regulation.
                                                 2
 ---pagebreak--- (8)    The Parties are active across the LNG value chain and overlap in the upstream
       wholesale supply and related services including liquefaction, transportation and
       regasification services. However, the Transaction gives rise to a very limited
       number of plausibly affected markets.
(9)    Specifically, the Transaction leads to the following plausibly affected markets:
       (i) the liquefaction of natural gas into LNG in the Atlantic Basin; (ii) the
       upstream wholesale supply of LNG in Spain; and (iii) the regasification of LNG
       in France.
(10)   There are also vertical relations between the activities of the Target Business
       and Total's activities in the exploration of oil and gas, gas trading and the
       downstream wholesale supply of natural gas. However, Total's position in the
       relevant segments is modest and the only plausibly vertically affected market
       relates to the regasification of LNG, as discussed later on, and the downstream
       wholesale supply of natural gas in France.6 Total's share of the latter market is
       well below 10% and has been decreasing over the past three years, while there is
       oversupply of regasification capacity in France. Hence, serious doubts of
       foreclosure effects can be excluded at the outset.
5.1.   Product Market Definition
5.1.1. Upstream wholesale supply of LNG
(11)   In its decisional practice, the Commission has considered a market
       encompassing the development, production and upstream wholesale supply of
       natural gas.7 However, in the recent Shell/BG case,8 the Commission found that
       the upstream wholesale supply of LNG could form a separate product market
       from the upstream wholesale supply of natural gas by pipeline (i.e., non-
       liquefied natural gas).
(12)   The Notifying Party contends that the segmentation of the product market
       between LNG and piped/non-liquefied gas is artificial because the two: (i) are
       perfectly interchangeable; (ii) are in direct competition; and, (iii) their price
       dynamics are closely correlated.
(13)   Though not entirely conclusive, the outcome of the market investigation carried
       out in the present case reveals that LNG and non-liquefied natural gas present
       distinguishing features.
6      Absent particular local market/regulatory circumstances, the sale and distribution of large
       volumes of gas to retailers and/or other wholesalers has been considered to form part of a market
       for the downstream wholesale supply of natural gas, defined as national in scope (M.6984 -
       EPH/Stredoslovenska Energetika ; M.3868 - DONG/Elsam/Energi E2). At that level, LNG has
       already been regasified so that it is indistinguishable from non-liquefied natural gas.
7      Case M.6910 – Gazprom/Wintershall/Target Business Companies; Case M.6801 –
       Rosneft/TNK-BP; Case M.5585 – Centrica /Venture Production; Case M.4545 – Statoil/Hydro.
8      Case M.7631 – Royal Dutch Shell/BG Group.
                                                        3
 ---pagebreak--- (14)   First, the market investigation confirmed that LNG was not substitutable with
       piped natural gas for certain applications.9 As a respondent indicated: "Although
       NG and LNG could be used interchangeably for most of applications, LNG
       could be used for heavy transportation, either vessels or trucks".
(15)   Second, the market investigation indicated that LNG is in principle more
       flexible than non-liquefied natural gas, notably in terms of delivery destination.
       Overall, the investigation also revealed that flexibility may depend on various
       conditions and variables that are not necessarily identical for LNG and non-
       liquefied natural gas.10
(16)   Third, the market investigation elicited mixed results in terms of similarity of
       the prices for LNG and non-liquefied natural gas, respectively.11 The market
       investigation also indicated that a direct correlation between the price of LNG
       and non-liquefied natural gas is difficult to establish.12 For example, a
       competitor explained that "an historical analysis of available price data lead us
       to say that LNG prices in the world are generally higher than pipeline gas",
       while another one explained that "[i]t depends on the specific case, including
       market as well as contractual conditions. LNG might in some cases be priced
       higher than pipe gas based on a higher degree of destination flexibility".
(17)   In any event, the exact product market definition can be left open for the
       purpose of this decision since the Transaction does not lead to serious doubts as
       to its compatibility with the internal market irrespective of whether the upstream
       wholesale supply of LNG is considered as a separate market or as part of a
       broader market encompassing non-liquefied natural gas.
5.1.2. Liquefaction of natural gas into LNG
(18)   In the past, the Commission considered the existence of a market encompassing
       the development, production and upstream wholesale supply of natural gas,
       which would also comprise the liquefaction of gas into LNG.13 However, in
       Shell/BG, the Commission found that the liquefaction of natural gas into LNG
       could constitute a separate product market, upstream to the (upstream)
       wholesale supply of LNG.14
(19)   The Notifying Party claims that there is no meaningful competition at
       liquefaction level and that the appropriate market definition is the broader one
       including liquefaction into the upstream wholesale supply of natural gas.
9      Replies to question 4 of eQuestionnaire 2 – Customers and of eQuestionnaire 1 – Competitors.
10     Replies to question 9 of eQuestionnaire 1 – Competitors.
11     Replies to question 5 of eQuestionnaire 2 – Customers and of eQuestionnaire 1 - Competiors.
12     Replies to question 6 of eQuestionnaire 2 – Customers and Replies to question 6 of
       eQuestionnaire 1 - Competitors
13     Case M.6910 – Gazprom/Wintershall/Target Business Companies; Case M.6801 – Rosneft/TNK-
       BP; Case M.5585 – Centrica/Venture Production; Case M.4545 – Statoil/Hydro.
14     EEA, North American east coast, Caribbean, South America and Northern and West Africa.
                                                     4
 ---pagebreak--- (20)   The market investigation carried out in the present case has revealed that there
       are certain – mainly US – companies offering liquefaction services on a stand-
       alone basis (via tolling arrangements). However, customers of the Parties do not
       normally source liquefaction services independently of the procurement of the
       gas; for the same reason, they most often don't have a choice of liquefaction
       facility.15 Generally, the competitors of the Parties have indicated that they do
       not provide liquefaction services on a stand-alone basis service to other
       upstream wholesale suppliers.16 Moreover, a number of competitors of the
       Parties do not own equity rights in liquefaction plants and some of them do not
       hold off-take rights from liquefaction plants either.17
(21)   The Commission therefore understands that liquefaction may be part of the
       logistics involved in the upstream wholesale supply of LNG or part of a separate
       market for the sale of LNG to wholesalers at liquefaction facilities.18 In any
       event, if the liquefaction of natural gas was to be considered as a product market
       separate from the upstream wholesale supply market, it would be upstream of it
       since customers sourcing liquefaction services are the upstream wholesalers who
       then sell on the liquefied gas.
(22)   In any event, the exact product market definition can be left open for the
       purpose of this decision since the Transaction does not lead to serious doubts as
       to its compatibility with the internal market irrespective of whether liquefaction
       services are considered as a separate market or part of a broader market for the
       development, production and upstream wholesale supply of LNG or natural gas.
5.1.3. Regasification of LNG
(23)   In previous decisions, the Commission has suggested that there may be a
       separate market for gas import infrastructure encompassing: (i) regasification
       services; (ii) interconnection points with international gas pipelines; and (iii)
       underground gas storage.19 The Commission has nonetheless left the exact
       market definition open.
(24)   Total submits that the appropriate market definition should encompass all gas
       import capacity, including import capacity via gas pipelines and LNG terminals,
       and that no further segmentation is necessary or appropriate because the product
       supplied through regasification terminals and international pipelines is
       substitutable from a demand-side perspective.
(25)   The market investigation did not yield clear results in that connection. Certain
       customers indicated that faced with a small but significant and non-transitory
       increase in the price of LNG regasification services, they could switch to
15     Replies to questions 19 and 20 of eQuestionnaire 1 – Competitors and Replies to question 15 of
       eQuestionnaire 2 – Customers.
16     Replies to questions 14-15 of eQuestionnaire 1 – Competitors.
17     Reply to question 14 of eQuestionnaire 2 – Customers.
18     Case M.7631 – Royal Dutch Shell/BG Group, para. 32.
19     Case M.5649 - RREEF FUND/ENDESA/UFG/SAGGAS.
                                                    5
 ---pagebreak---        importing (more) gas via international pipelines.20 The willingness to perform
       such a switch is however described as dependent on other factors, including the
       price difference between LNG and non-liquefied natural gas and the geographic
       area to which the gas (or LNG) is imported, due to the difference of import
       infrastructure in each member state.
(26)   Certain competitors of the Parties also indicated that, faced with small but
       significant and non-transitory increase in price of regasification services, they
       could switch to procuring more gas volumes via international pipelines, at least
       to the extent that other factors also point toward a need to rebalance the mix of
       supply between LNG and non-liquefied natural gas.21 For example, one
       competitor explained that "[t]rading of natural gas is price sensitive. Although
       we would not necessarily stop LNG trading activity, there would likely be a
       desire to increased imports of natural gas via international pipelines".
(27)   In any event, the exact product market definition can be left open for the
       purpose of this decision since the Transaction does not lead to serious doubts as
       to its compatibility with the internal market irrespective of whether LNG
       regasification services are considered to belong to a separate market or to be part
       of a broader market encompassing other gas import infrastructures aimed for
       non-liquefied gas.
5.2.   Geographic Market Definition
5.2.1. Upstream wholesale supply of LNG
(28)   In the past, the Commission considered that the market for the upstream
       wholesale supply of LNG could be national or wider in scope, possibly
       encompassing the entire EEA; however, the precise geographic market
       definition was left open.22 The Notifying Party claims that if a product market
       for the upstream wholesale supply of LNG was to be retained, the geographic
       scope of that market would be broader than national.
(29)   In the present case, the outcome of the market investigation was inconclusive as
       to whether a possible market for the upstream wholesale supply of LNG would
       be national, regional (group of member states) or EEA in scope. In particular,
       while certain customers and competitors responding to the market investigation
       share the view that prices of LNG are not homogenous in the EEA and that price
       differences across Member States or groups of Member States can be material,
       others consider that, independently on regional variations, e.g., between
       Northern and Southern Europe, prices are fairly correlated across Europe.23
20     Replies to question 18 of eQuestionnaire 2 – Customers.
21     Replies to question 23 of eQuestionnaire 1 – Competitors.
22     COMP/M.6910 – Gazprom / Wintershall / Target Companies; Case M.7631, Royal Dutch
       Shell/BG Group, para. 30.
23     Replies to question 29 and 31 of eQuestionnaire 1 – Competitors.
                                                     6
 ---pagebreak--- (30)   In any event, the exact geographic market definition can be left open for the
       purpose of this decision since the Transaction does not lead to serious doubts as
       to its compatibility with the internal market irrespective of whether the upstream
       wholesale supply of LNG is considered to be national, regional or EEA-wide in
       scope.
5.2.2. Liquefaction of natural gas into LNG
(31)   In Shell/BG, the Commission considered that the appropriate scope of the
       plausible market for natural gas liquefaction could be set at the level of the
       "Atlantic basin", comprising the EEA, the Northern American East Coast, the
       Caribbean, South America and Northern and Western Africa, possibly also
       including the Middle East and South Eastern Asia.24
(32)   The Notifying Party is of the view that the relevant geographic market should
       include at least liquefaction plants located in the Atlantic Basin, and could be
       broader, including the Middle East (in particular given that Qatar has been the
       largest exporter of LNG into the EU since at least 2014) and South Eastern Asia.
(33)   The market investigation was not entirely conclusive as regards the geographic
       scope of the possible market for natural gas liquefaction, a majority of
       competitors to the Parties indicated that they source LNG from the Atlantic
       Basin, including the Middle East.25
(34)   In any event, the exact geographic market definition can be left open for the
       purpose of this decision since the Transaction does not lead to serious doubts as
       to its compatibility with the internal market irrespective of whether the possible
       market for natural gas liquefaction is considered to be limited to the Atlantic
       Basin or wider in scope, especially including the Middle East region.
5.2.3. Regasification of LNG.
(35)   In past decisions, the Commission suggested that the market for gas import
       infrastructure, including LNG regasification terminals, was national in scope but
       ultimately left the exact market definition open.26 The Notifying Party submits
       that the relevant geographic market for gas infrastructure is broader than
       national.
(36)   Customers responding to the market investigation indicated that they generally
       use the regasification terminals in the Member State where the LNG is sold and,
       as explained above, they would not switch to terminals located in a different
       Member State if faced with small but significant and non-transitory increase in
       price of regasification services.27 Likewise, competitors to the Parties have
       explained that LNG is typically regasified as close as possible to the place of
24     Case M.7631, Royal Dutch Shell/BG Group, paras. 40-41.
25     Replies to question 33 of eQuestionnaire 1 - Competitors
26     Case M.5649 – RREEF FUND/ENDESA/UFG/SAGGAS.
27     Replies to question 18 and 33 of eQuestionnaire 2 – Customers
                                                     7
 ---pagebreak---        consumption.28 Conversely, regasifying LNG in another Member State to have it
       then transported to its final destination is generally possible but more expensive.
(37)   In any event, the exact geographic market definition can be left open for the
       purpose of this decision since the Transaction does not lead to serious doubts as
       to its compatibility with the internal market irrespective of whether the possible
       market for LNG regasification is considered to be national or wider in scope.
5.3.   Competitive assessment
(38)   As noted, when considering the narrowest plausible alternative and applying the
       most conservative calculation methodologies, the Transaction gives rise to the
       following horizontally affected markets:
       a.      Upstream wholesale supply of LNG in Spain;
       b.      Liquefaction of natural gas in the Atlantic Basin; and,
       c.      Regasification of LNG in France.
5.3.1. Upstream wholesale supply of LNG in Spain.
(39)   On a plausible market limited to the upstream wholesale supply of LNG
       (excluding non-liquefied natural gas), the combined market share of the Parties
       remains limited irrespective of the geographic market definition retained.29 In
       fact, Spain is the only EEA Member State where the combined market share of
       the Parties would slightly exceed [20-30]%.
       5.3.1.1.       Market structure
(40)   The Notifying Party has relied on two alternative methodologies for calculating
       market shares: (i) [a methodology based on IHS Markit data] and (ii) the
       alternative methodology.
(41)   Under [a methodology based on IHS Markit data], volumes are attributed to the
       company responsible for chartering the vessel used for the delivery of the LNG
       at the terminal of destination. Under this methodology, the identity of the
       company to which the volumes is allocated depends on the contractual
       arrangements (the seller in case of DES contracts and the buyer in the case of
       FOB contracts). This methodology is therefore not entirely accurate, but it
       contains competitors' data.
(42)   Under the alternative methodology, LNG sales volumes are attributed to
       suppliers irrespective of whether the said volumes: (a) are purchased by that
       supplier from a liquefaction plant and resold to a purchaser of LNG; or (b) are
       delivered to a purchaser of LNG by a third party on behalf of the supplier in
       question. This methodology may provide a more reliable estimate of the position
       and activities of the Parties given that it captures their sales in each EEA
28     Replies to question 35 of eQuestionnaire 1 – Competitors.
29     Under a wider product market definition encompassing upstream wholesale of both piped
       natural gas and LNG, the combined market shares of the Parties will be lower and below 20% in
       any geographic market.
                                                     8
 ---pagebreak---           Member State, rather than attributing their sales to the entities that happen to
          charter the vessels. However, due to the lack of publicly available data, sales
          figures of competitors are not available under that methodology.
(43)      The tables below illustrate the Parties' and their competitors market shares
          (when available) under the two alternative methodologies:
Table 1 - Upstream wholesale supply (LNG only) in Spain – [a methodology based on IHS
Markit data]
                           Upstream wholesale supply (LNG only) – [a methodology based on IHS
                                                        Markit data]
          Spain                   2016                      2015                     2014
                          Volume                    Volume                   Volume
                                           %                          %                      %
                           (mtpa)                    (mtpa)                  (mtpa)
 Total                         […]         [0-5]%        […]          [0-5]%     […]         [0-5]%
 Target Business               […]         [0-5]%        […]          [0-5]%     […]      [10-20]%
 Combined (Total and
                               […]        [0-5]%         […]         [0-5]%      […]     [10-20]%
 Target Business)
 Nigeria LNG                   […]    [30-40] %          […]     [20-30]%        […]      [10-20]%
 Sonatrach                     […]     [20-30]%          […]     [10-20]%        […]      [10-20]%
 Shell-BG                      […]     [10-20]%          […]     [10-20]%        […]      [10-20]%
 Qatargas                      […]       [5-10]%         […]        [5-10]%      […]       [5-10]%
 ENI                           […]         [0-5]%        […]        [5-10]%      […]      [10-20]%
 RasGas                        […]       [5-10]%         […]        [5-10]%      […]       [5-10]%
 Gas Natural Fenosa            […]         [0-5]%        […]        [5-10]%      […]       [5-10]%
 Statoil                       […]         [0-5]%        […]          [0-5]%     […]       [5-10]%
 Total Market                 10.3          100%        10.0           100%      11.2         100%
                                          Source: Form CO.
Table 2 - Upstream wholesale supply (LNG only) in Spain – alternative methodology
                             Upstream wholesale supply (LNG only) – Alternative methodology
                                  2016                       2015                     2014
         Spain
                         Volume                     Volume                   Volume
                                          %                            %                      %
                          (mtpa)                     (mtpa)                   (mtpa)
Total                         […]       [10-20]%         […]       [10-20]%       […]        [5-10]%
Target Business               […]        [5-10]%         […]         [5-10]%      […]        [5-10]%
Combined (Total and
                              […]      [20-30]%          […]      [10-20]%        […]      [10-20]%
Target Business)
Total Market                  10.3          100%         10.0           100%      11.2         100%
                                          Source: Form CO.
          5.3.1.2.     Assessment
(44)      For the reasons below, the Commission takes the view that the Transaction will
          not result in a significant impediment of effective competition in relation to the
          upstream wholesale supply of LNG.
                                                      9
 ---pagebreak--- (45)   First, the market share of the merged entity remains limited, just around or
       above [10-20]%. Thus, under any alternative plausible product and market
       definition and irrespective of the calculation methodology adopted, the
       combined market share of the Parties remains below 25%, which typically
       entails a presumption of compatibility with the internal market.30
(46)   Second, the merged entity will continue to face competition from a significant
       number of competitors. Customers responding to the market investigation
       indicated that competitors such as Gas Natural Fenosa, Nigeria LNG, Statoil,
       ENI, Shell, Engie, Koch, QatarGas, BP and Cheniere supply LNG in Spain at
       upstream wholesale level,31 which is consistent with the views expressed by the
       competitors of the Parties.32
(47)   Third, none of the customers responding to the market investigation indicated
       that the Parties were significant competitors in Spain. To the contrary, the
       majority of customers consider Gas Natural Fenosa as the strongest competitor
       to each of the Parties followed by players such as Shell, Endesa and QatarGas.33
       This is consistent with the views expressed by the competitors of the Parties.34
(48)   Fourth, the majority of customers who responded to the market investigation
       indicated that a sufficient number of alternative suppliers serving the Spanish
       market will remain post-Transaction.35
(49)   Finally, a majority of customers and competitors do not foresee that the
       Transaction will have an appreciable impact on the supply of LNG at EEA level
       or in Spain.36 As explained by a customer responding to the market
       investigation: "there are many alternatives and the current weight of both
       companies in the LNG supply to Europe is not very significant".
       5.3.1.3.      Conclusion
(50)   In light of the above considerations, the Commission concludes that the
       Transaction does not raise serious doubts as to its compatibility with the internal
       market with respect to the upstream wholesale supply of LNG in Spain.
5.3.2. Liquefaction of gas into LNG in the Atlantic Basin.
(51)   As noted, though it seems to have little relevance in the present case, the
       existence of a separate market for liquefaction services has been considered
       plausible in the recent past, and defined as covering at least the Atlantic Basin.
30     Merger Regulation, recital 32.
31     Replies to question 37.2 of eQuestionnaire 2 – Customers
32     Replies to question 39 of eQuestionnaire 1 - Competitors
33     Replies to question 38.2 of eQuestionnaire 2 – Customers
34     Replies to question 40 of eQuestionnaire 1 - Competitors
35     Replies to question 39.2 of eQuestionnaire 2 – Customers.
36     Replies to questions 50 and 51 of eQuestionnaire 2 – Customers and Replies to question 51 of
       eQuestionnaire 1 – Competitors.
                                                     10
 ---pagebreak--- (52) Liquefaction plants are generally owned and operated by joint ventures and are
     generally made up of different "trains" used to convert natural gas into LNG.
     Total has an interest in 21 liquefaction trains. These 21 separate liquefaction
     trains relate to eight of the 29 liquefaction plants worldwide. The total existing
     and projected liquefaction capacity is a publicly available data.
     5.3.2.1.      Market structure
(53) In order to calculate their respective market shares, the Parties put forward three
     alternative methodologies:
     a.     The "equity rights" methodology whereby each of the Parties is allocated
            a share of capacity in each train proportional to the equity rights owned in
            that train. If this methodology is adopted, the 2016 combined market share
            of the Parties would be [0-5]% on a worldwide level and [5-10]% in the
            Atlantic Basin. By 2022, the market share of the combined entity is
            projected to reduce to [0-5]% at worldwide level and [5-10]% in the
            Atlantic Basin;
     b.     The "contracted off-take rights" methodology whereby each Party is
            allocated a share proportional to the share of contracted LNG off-take
            rights under long-term and medium-term contracts in force at the end of
            2016. If this methodology is adopted, the 2016 combined market share of
            the Parties would be [5-10]% on a worldwide level and [10-20]% in the
            Atlantic Basin. By 2022, the market share of the combined entity is
            projected to reach [5-10]% at worldwide level and [10-20]% in the
            Atlantic Basin;
     c.     The "veto rights" methodology whereby 100% of the nominal capacity of
            each of the plants over which the Parties have control or a technical right
            of veto, is attributed to the Parties. This methodology is very conservative
            as it leads to multiple counting. For example, the overall liquefaction
            capacity of a plant that is jointly controlled by four market players is
            allocated in its entirety to each of the four players, yet it is only counted
            once in the market size estimate.
(54) The Transaction will generate an affected market only if the "veto rights"
     methodology is adopted. If this methodology is applied, the 2016 combined
     market share of the Parties would be [10-20]% on a worldwide level and [20-
     30]% in the Atlantic Basin. By 2022, the market share of the combined entity is
     projected to reach [10-20]% at worldwide level and [20-30]% in the Atlantic
     Basin.
     5.3.2.2.      Assessment
(55) The Commission takes the view that the Transaction will not result in a
     significant impediment of effective competition in relation to liquefaction.
(56) First, even under the most conservative market share calculation method the
     combined market share of the Parties is not very large. Moreover, the Parties'
     market position is overstated since this methodology entails that a significant
     proportion of liquefaction capacity is double counted.
                                               11
 ---pagebreak--- (57) Second, customers and competitors responding to the market investigation
     indicated that while Total is considered to hold significant interests in a range of
     liquefaction facilities, the Target Business is not.
(58) Third, all customers responding to the market investigation indicated that they
     will have a sufficient number of alternative suppliers post Transaction. This is
     also supported by the responses of competitors who indicated that there is
     sufficient spare liquefaction capacity available in the Atlantic Basin.37
(59) Fourth, competitors responding to the market investigation indicated that in the
     last years they did not have difficulty in accessing liquefaction capacity as such.
     Some competitors indicated that the difficulty was rather in obtaining prices that
     would make LNG competitive with non-liquefied natural gas in the EEA. The
     Commission considers that this supports the view that LNG and non-liquefied
     natural gas constrain each other rather than pointing to a competitive issue on
     any possible liquefaction market.
(60) Fifth, the Commission considered in Shell/BG that there are significant imports
     of LNG into the EEA from regions outside the Atlantic Basin and that suppliers
     active in the Atlantic Basin would likely face competition from large suppliers
     such as Qatar Petroleum. This finding is still valid, notably since Qatar is in fact
     the main LNG supplier to the EU representing 46% of EU imports in the second
     quarter of 2017.
(61) In that decision, the Commission also took into account the fact that “(Shell and
     BG) share of long-term contracted offtake rights (i.e. the right to off-take LNG
     at liquefaction plants) within the Atlantic basin amounted to only [20-30]%,
     which means that a significant proportion of the offtake rights at the
     liquefaction facilities within the Atlantic basin over which the merged entity
     (Shell/BG) would hold a technical right of veto would already be contracted to
     third parties on a long-term basis”. The fact that the a significant proportion of
     the offtake rights are contracted under long-term agreements still holds true and
     Total's share of long-term and medium-term offtake rights in the Atlantic Basin
     amounted to only [10-20]% in 2016 and is expected to amount to [10-20]%
     in 2022.
     5.3.2.3.      Conclusion
(62) In light of the above considerations, the Commission concludes that the
     Transaction does not raise serious doubts as to its compatibility with the internal
     market with respect to the liquefaction of LNG in the Atlantic Basin.
37   Replies to question 47 of eQuestionnaire 1 – Competitors. In Shell/BG, the Commission also
     observed that sufficient capacity would remain available in 2019, 2022 and 2026 in the Atlantic
     Basin, when a number of large offtake contracts are expected to end at the same time. There is
     no reason to deviate from this finding in the present case.
                                                    12
 ---pagebreak--- 5.3.3.    Regasification of LNG in France.
(63)      As noted, the narrowest plausible alternative market in relation to gas import
          infrastructure would be to consider independently LNG regasification facilities
          on a national level. As a result, the only affected market would be the supply of
          regasification services in France.
(64)      There are four large scale regasification terminals in France, as follows:
Table 3 – List of French LNG terminals.
                                                                     Total
                                                                                 Total Nom.Annual
                                  Name of                   Nom.Annual Cap.
   Country                                                                         Cap. in mtpa of
                                installation                    bcm (N)/year
                                                                                    LNG (2016)
                                                                    (2016)
                         Fos-Tonkin LNG Terminal               3.00                2.2
                     Montoir-de-Bretagne LNG Terminal         10.00                7.3
     France                                                                34.25             25.0038
                         Fos Cavaou LNG Terminal               8.25                6.0
                         Dunkerque LNG Terminal               13.00                9.5
                                           Source: Form CO.
          5.3.3.1.     Market structure
(65)      The tables below present the Parties' current and projected share of capacity
          rights in the French terminals.
Table 4 - Parties’ capacity rights in regasification terminals 2016
                      Regasification           Total         Target Business        Combined
   Re- gasification
                         capacity
       terminal                         mtpa         %      mtpa           %     mtpa       %
                          (mtpa)
  All France                   25.039     […]    [10-20]%     […]      [30-40]%   […]    [40-50]%
  Fos Cavaou                      6.0     […]     [20-30]%    […]      [60-70]%   […]    [80-90]%
  Fos Tonkin                      2.2     […]       [0-5]%    […]      [80-90]%   […]    [80-90]%
  Montoir-de-
                                  7.3     […]       [0-5]%    […]      [40-50]%   […]    [40-50]%
  Bretagne
  Dunkerque                       9.5     […]     [10-20]%    […]         [0-5]%  […]    [10-20]%
                                           Source: Form CO.
38        Includes Dunkerque, operational from Q1- 2017.
39        Includes Dunkerque, operational from Q1 2017.
                                                      13
 ---pagebreak--- Table 5 - Parties’ capacity rights in regasification terminals 2022
    Country / re-        Regasification           Total            Target Business          Combined
     gasification          capacity
       terminal             (mtpa)         mtpa         %         mtpa         %        mtpa         %
  All France                       30.5     […]      [10-20]%      […]    [20-30]%        […]     [30-40]%
               40
  Fos Cavaou                       11.9     […]      [10-20]%      […]     [30-40]%       […]     [40-50]%
  Montoir-de-
            41                      9.1     […]         [0-5]%     […]     [60-70]%       […]     [60-70]%
  Bretagne
  Dunkerque                         9.5     […]      [10-20]%      […]        [0-5]%      […]     [10-20]%
                                             Source: Form CO.
           5.3.3.2.      Assessment
(66)       For the reasons below, the Commission takes the view that the Transaction will
           not result in a significant impediment of effective competition on a market for
           the regasification of LNG in France.
(67)       First, the capacity of regasification terminals in the EEA and in France is
           structurally underutilised. The table below provides a breakdown of the
           estimated utilisation rate of regasification terminals in the EEA in 2016 and the
           first half of 2017.
                                                                                              Utilisation rate
                                          Name of                         Utilisation rate
    Country                                                                                    first-half of
                                        installation                           201642
                                                                                                   201743
     Belgium                    Zeebrugge LNG Terminal                       [20-30]%            [10-20]%
                               Fos-Tonkin LNG Terminal
                          Montoir-de-Bretagne LNG Terminal
    France44                                                                 [30-40]%            [40-50]%
                               Fos Cavaou LNG Terminal
                               Dunkerque LNG Terminal
      Greece                    Revithoussa LNG Terminal                     [10-20]%            [30-40]%
                                 Panigaglia LNG terminal
       Italy                   Porto Levante LNG terminal                    [40-50]%            [50-60]%
                           FSRU OLT Offshore LNG Toscana
    Lithuania                      FSRU Independence                         [30-40]%            [20-30]%
40         Includes a planned expansion of 2.75 bcm in 2020 and 5.5 bcm in 2022 (in total, approximately
           5.9 mtpa).
41         Includes a planned expansion of 2.5 bcm in 2020 (approximately 1.8 mtpa).
42         Calculated on gross imports.
43         Calculated on gross imports.
44         Dunkerque excluded from the calculation of utilisation rate because it started operating only in
           late December 2016 and its utilisation rate has since then been particularly low.
                                                          14
 ---pagebreak---                                                                                    Utilisation rate
                                       Name of                   Utilisation rate
    Country                                                                         first-half of
                                     installation                     201642
                                                                                        201743
   Netherlands                Gate terminal, Rotterdam              [10-20]%          [10-20]%
      Poland                Swinoujscie LNG Terminal                [20-30]%          [30-40]%
     Portugal                    Sines LNG Terminal                 [20-30]%          [40-50]%
                              Barcelona LNG Terminal
                                Huelva LNG Terminal
                              Cartagena LNG Terminal
      Spain                      Bilbao LNG terminal                [20-30]%          [20-30]%
                                Sagunto LNG terminal
                              Mugardos LNG Terminal
                            Gijón (Musel) LNG terminal
                             Isle of Grain LNG terminal
 United Kingdom        Milford Haven - Dragon LNG terminal          [20-30]%          [10-20]%
                     Milford Haven - South Hook LNG terminal
                                          Source: Form CO.
(68)      Second, EU regasification capacity is expected to increase significantly over the
          coming years, with no less than a 50% increase expected by 2025.
               Source: Form CO/Gas Infrastructure Europe – LNG investment database
                                                     15
 ---pagebreak--- (69) Third, access to the Fos-Tonkin, Fos Cavaou and Montoir-de-Bretagne terminals
     is governed by French regulation according to a “use it or lose it” mechanism.45
     Under that mechanism, suppliers that do not use the capacity they have booked
     are obliged to release it back. In practice:
     a.      Holders of regasification capacity have to inform the operator of the
             terminal, at the latest on the 20th day of month M-1, of their requested
             monthly schedule of unloading operations for month M, as well as their
             draft unloading schedules for months M+1 and M+2;
     b.      The terminal operator publishes, on the 25th day of month M-1 for month
             M, the available capacity by taking into account the subscribed capacity
             that is not subject to a schedule request. For information, the operator also
             publishes this data for months M+1 and M+2. The information about
             available capacity is then updated on a daily basis;
     c.      If the schedule for month M shows no available unloading slot, each
             cancellation of an unloading operation without notice, unless for reasons
             of force majeure, is formally noted and communicated to the regulator.
             When the terminal’s capacity is fully booked, the regulator may require a
             particular supplier to release subscribed capacity on a case by case basis,
             in order to free capacity at the terminal; and
     d.      If access to the terminal’s regasification capacity is seen to be congested,
             the terminal operator will, upon the French regulator' request, provide it
             with full information on subscription requests for the period of
             congestion.
(70) The Dunkerque LNG Terminal operational since December 2016 is currently
     exempted from this regulatory scheme but is subject to a “use it or lose it”
     mechanism similar to that described above. In effect, by virtue of the French
     governmental decree granting the exemption, Dunkerque LNG has to ensure that
     there is a mechanism in place whereby capacities subscribed but not used are
     made available to other market players.
(71) Fourth, customers responding to the market investigation indicated that they
     never had issues in accessing […]* capacity in the EEA in general and in France
     in particular. To the contrary, a customer indicated that "European market is
     long in regasification".46 Competitors responding to the market investigation
     gave similar indications and explained that "[i]n general terms, there is
     available regasification capacity in the EEA" and "[m]ore generally the average
     load factor of LNG terminals in Europe has been quite low during the 5 past
     years so that there has not been actually any problem of access".47
45   Tariffs are also set in accordance with rules and principles set out by the regulator, and each of
     the three regulated terminals is subject to a "ship or pay" clause.
46   Replies to question 48 of eQuestionnaire 2 – Customers.
47   Replies to question 49 of eQuestionnaire 1 – Competitors.
*    should read: “regasification”.
                                                     16
 ---pagebreak---        5.3.3.3.     Conclusion
(72)   In light of the above considerations, the Commission considers that the
       Transaction does not raise serious doubts as to its compatibility with the internal
       market with respect to the regasification of LNG in France.
5.3.4. State aid aspects
(73)   In its assessment, the Commission took into account the grant of State aid to the
       undertakings concerned:48 the Target Business includes the entity GDF Suez
       LNG Supply S.A., which is currently subject to an in-depth State aid
       investigation initiated pursuant to Article 108(2) TFEU with respect to tax
       rulings granted by Luxembourg.49 However, the potential State aid in question is
       not inherent in the Transaction and the consequences of the ongoing proceedings
       have been factored into the Parties' contractual arrangements. In any event, the
       potential aid would not increase the financial and resulting commercial strength
       of the merged entity in a manner that would alter the outcome of the merger
       control assessment of the Transaction, notably in view of the constraints
       remaining on the merged entity.
6.     CONCLUSION
(74)   For the above reasons, the European Commission has decided not to oppose the
       notified operation and to declare it compatible with the internal market and with
       the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of
       the Merger Regulation and Article 57 of the EEA Agreement.
                                                         For the Commission
                                                         (Signed)
                                                         Margrethe VESTAGER
                                                         Member of the Commission
48     Case T-156/98, RJB Mining plc v Commission [2001] ECR II-337, para. 114.
49     Commission decision of 19 September 2016 in Case SA.44888 (NN/2016) (ex EO/2016) –
       Luxembourg/Possible State aid in favour of GDF Suez, C(2016) 5612 final.
                                                   17