CELEX: 32015M7579
Language: en
Date: 2015-06-19 00:00:00
Title: Commission Decision of 19/06/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7579 - ROYAL DUTCH SHELL / KEELE OY / AVIATION FUEL SERVICES NORWAY) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                        Brussels, 19.6.2015
                                        C(2015) 4285 final

                                        [pic]

                                        [pic]

                                        To the notifying parties

Dear Sir/Madam,

Subject:    Case M.7579 - ROYAL DUTCH SHELL / KEELE OY / AVIATION FUEL SERVICES NORWAY
         Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1] and Article 57 of the Agreement on the European
         Economic Area[2]

    1) On 12th May 2015, the European Commission received a notification  of  a  proposed  concentration  pursuant  to  Article  (4)  of  Council
       Regulation (EC) No 139/2004 by which Shell Exploration and Production Holding B.V. ("SEPH", the  Netherlands),  ultimately  controlled  by
       Royal Dutch Shell plc ("RDS", England), and St1 Group Oy and St1 Nordic Oy (collectively, "St1", Finland) both  controlled  by  Keele  Oy,
       will acquire within the meaning of Article 3(1)(b) and 3(4) of the Merger Regulation joint control of Aviation Fuelling Services Norway AS
       ("AFSN" or "JV", Norway), currently a 100% subsidiary of SEPH, by way of purchase of shares[3]. (SEPH and St1 are  designated  hereinafter
       as the 'notifying parties' and together with AFSN 'parties to the proposed transaction'.)

       THE PARTIES

    2) SEPH is part of the Shell Group ("Shell"), the ultimate parent of which is RDS. Shell is active in the worldwide exploration,  production,
       and sale of oil and natural gas, the production and sale of oil products and chemicals, power generation, and  the  production  of  energy
       from renewable sources.

    3) St1 Group Oy and its sister company St1 Nordic Oy (together hereinafter referred to as "St1") are both subsidiaries of Keele Oy. St1 Group
       Oy has subsidiaries in Sweden consisting of St1’s Swedish supply and refining businesses.

    4) AFSN is a 100% subsidiary of SEPH, consisting of Shell’s current aviation fuel marketing business in Norway. It  includes  Shell’s  entire
       Norwegian aviation fuel marketing business, i.e., marketing & sales, physical delivery of fuel at  the  twelve  Norwegian  airports  where
       aviation fuel is stored and delivered to airline customers, and ancillary activities, including contracting with carriers based in Norway.

       THE OPERATION

    5) Pursuant to the proposed transaction, SEPH will transfer 50% of its participating interest  in  ASFN  to  St1.  Therefore,  following  the
       transaction, ASFN will be owned on a 50/50 basis by SEPH and St1.

       THE CONCENTRATION

    6) The proposed transanction entails the acquisition by St1 of a participating interest equal to 50% of the issued share capital in ASFN. The
       remaining 50% will be owned by SEPH.

    7) ASFN will be jointly controlled by SEPH and St1 within the meaning  of  Article  3(1)(b)  of  the  Merger  Regulation.  According  to  the
       shareholders agreement of ASFN, […].

    8) ASFN will be fully functional within the meaning of Article 3(4) of the Merger Regulation. ASFN will have its own personnel with regard to
       sales, purchasing, finance and operations and will outsource to Shell only some technical services. Also, the agreements entered into  for
       this purpose will be on an arm's length basis. ASFN will have a management dedicated to  its  day-to-day  operation.  ASFN  will  contract
       directly with its own customers. Whereas at present, ASFN purchases jet fuel from […], ASFN will further develop its own dedicated  supply
       role with responsibility for and expertise in negotiating such supply arrangements on behalf of ASFN. If post-transaction, […], ASFN  will
       intend to purchase jet fuels from its parents, it would do so on terms negotiated between the parties on an arm’s  length  basis.[4]  ASFN
       will perform its business activities on a lasting basis as no end date has been specified in the agreements.

    9) Therefore, the transaction constitutes a concentration within the meaning of Article 3(1)(b) and Article 3(4) of the Merger Regulation.

       EU DIMENSION

   10) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million[5] (St1: EUR 6 588 million; Shell:
       EUR 317 471 million). Each of them has an EU-wide turnover in excess of EUR 250 million (St1: EUR […] million; Shell:  EUR  […]  million),
       and they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State.

       MARKET DEFINITION

   11) The parties to the transaction are active in the market for into-plane sales of aviation fuel and on the upstream market  for  ex-refinery
       sales of aviation fuel. Aviation fuel is a product of the crude oil refining process, which is used to  power  aircrafts.  There  are  two
       types of aviation fuels: jet fuel and aviation gasoline (avgas). Jet fuel is a kerosene based  fuel  used  in  turbine  engined  aircraft,
       typically larger commercial aircrafts. Avgas is a gasoline  based  fuel  used  in  piston  engined  aircraft,  typically  smaller  private
       aircrafts.[6]

1 Product market definition

       5.1.1        Ex-refinery sales

   12) The Commission has previously found that there is a market for ex-refinery sales of aviation fuel which are sales of large  quantities  by
       refineries to wholesalers, resellers or airlines with access to the required  transport  and  storage  infrastructure.  These  sales  also
       include sales to into-plane suppliers.[7] The Commission also concluded that this market includes both the sales of avgas and the sales of
       jet fuel.[8]

   13) The Parties agree that ex-refinery aviation fuel sales form part of a separate market from the into-plane aviation fuel sales.

   14) In the present case, the Commission considers that ex-refinery sales of aviation fuel constitute a separate market  which  includes  avgas
       and jet fuel.

2 Into-plane sales of aviation fuel

   15) The Commission has previously found that there is a market for into-plane supply of  aviation  fuel,  which  consists  of  the  supply  of
       aviation fuel at individual airports under contracts between into-plane suppliers and  airlines.  In  that  market,  into-plane  suppliers
       supply the aviation fuel pursuant to arrangements with servicing companies (of which the into-plane fuel supplier may  or  may  not  be  a
       member/owner) that operate the airport fuelling infrastructure  (storage,  hydrant  pipelines)  and  perform  actual  into-plane  fuelling
       services with dispenser vehicles or fuelling trucks to the aircrafts.[9] The Commission has left open the  question  whether  this  market
       should be further segmented between the sales of avgas and jet fuel.[10]

   16) The Parties agree that a distinction should be made between ex-refinery and into-plane aviation fuel sales. Activities with regard to into-
       plane sales of aviation fuel can be considered as ‘downstream’ to Shell’s activities on the market for ex-refinery fuel sales.

   17) In the present case, the Commission considers that into-plane supply of aviation fuel constitutes a separate product  market.  As  regards
       the potential distinction of aviation fuel between avgas and jet fuel, the Commission considers that this question can be left open as the
       proposed transaction does not raise serious doubts as to its compatibility with the internal market regardless of the exact product market
       definition retained.

   5.2.     Geographic market definition

   5.2.1    Ex-refinery sales

   18) In previous decisions, the Commission has considered that ex-refinery aviation fuel  sales  take  place  on  an  EEA/European  or  Western
       European geographic market but  also  considered  that  the  market  could  be  narrower,  possibly  encompassing  only  the  Scandinavian
       countries.[11]

   19) The Notifying Parties submit that the scope of the relevant geographic market for ex-refinery aviation fuel sales should  be  regarded  as
       encompassing the EEA as aviation fuel may with relative ease be transported over vast distances and ex-refinery aviation  fuel  sales  are
       generally provided, from a supply perspective, by many of the same large providers that are active throughout the EEA.

   20) In the present case, the geographic market definition for into-plane aviation fuel can be left open as the proposed transaction  does  not
       raise serious doubts as to its compatibility with the internal market with respect to any plausible geographic market definition.

   5.2.2    Into-plane sales of aviation fuel

   21) The Commission has previously taken the view that the scope of the geographic market for  into-plane  supply  is  limited  to  a  specific
       airport, due to the airport-specific supply contracts and fuelling infrastructure specific to each airport.[12]

   22) The Parties agree with the above mentioned definition. However, in the present case,  the  geographic  market  definition  for  into-plane
       aviation fuel can be left open as the proposed transaction does not raise serious doubts as to its compatibility with the internal  market
       with respect to any plausible geographic definition.

       COMPETITIVE ASSESSMENT

   23) According to the Notifying Parties, the proposed transaction does not lead to any horizontally affected market.  Both  SEPH  and  St1  are
       active on the market for into-plane sales of aviation fuel but they do not compete on the same airports. In  addition,  while  the  parent
       company of SEPH, that is Shell, and St1 are both currently active in the upstream  ex-refinery  supply  of  aviation  fuel  to  into-plane
       marketing companies, the JV will have no activities at that level of the market as it will be active in retail sales of aviation  fuel  at
       airports only.

   24) The transaction gives rise to vertically affected markets between the upstream ex-refinery sales of aviation fuel by St1  and  Shell,  and
       the downstream into-plane aviation fuel supply of ASFN. With regard to Shell and St1's activities upstream ex-refinery at EEA  level,  the
       combined market shares of the Notifying Parties is very limited and in any event below [5-10]%  under  any  plausible  market  definition.
       Shell and St1 have at global level a market share of [0-5]% and less than  1%  respectively  whereas  at  Scandinavian  level,  (i.e.  the
       narrowest possible geographic market), their market shares amount to [5-10]% and [0-5]% respectively.

   25) On the downstream market, if a market for into-plane supply of aviation fuel (including avgas and jet  fuel)  were  considered,  ASFN  has
       market shares in excess of 30% in 9 airports in Norway, as detailed in the following table 1:

Table 1

  |Estimated Total sales 2013 (‘000 USD)  |Shell sales value 2013 (‘000 USD)  |Shell’s estimated market share 2013  |Estimated Total sales value
  2014 (‘000 USD)  |Shell sales value 2014 (‘000 USD)  |Shell’s estimated market share 2014  | |Bergen-Flesland (BGO)  |[…]  |[…] |[20-30] % |[…]
|[…] |[30-40] % | |Tromsø (TOS) |[…] |[…] |[50-60] % |[…] |[…] |[60-70] % | |Stavanger (SVG) |[…] |[…] |[20-30] % |[…] |[…] |[20-30]  %  |  |Bodø
   (BOO) |[…] |[…] |[0-5] % |[…] |[…] |[0-5] % | |Sandefjord-Torp (TRF) | […] |[…] |[20-30] % |[…] |[…] |[20-30] % | |Rygge (RYG) |[…] |[…] |[60-
   70] % |[…] |[…] |[60-70]% | |Trondheim (TRD) |[…] |[…] |[40-50] % |[…] |[…] |[40-50] % | |Oslo Gardermoen (OSL) |[…] |[…] |[20-30] % |[…] |[…]
|[30-40] % | |Ålesund (AES) |[…] |[…] |[90-100] % |[…] |[…]  |[90-100]%  |  |Molde  Årø  (MOL)  |[…]  |[…]  |[90-100]%  |[…]  |[…]  |[90-100]%  |
|Kristiansand (KRS) |[…] |[…] |[90-100]% |[…] |[…] |[90-100]% | |Kristiansund Kvernberget (KSU) |[…]  |[…]  |[90-100]%  |[…]  |[…]  |[90-100]%  |
|Total  | 1 251 210  | […]  |[30-40] % | 1 232 441  | […] |[30-40] % | |

   26) AFSN has virtually the same market shares at each of those airports if only jet fuel sales (which represent the vast majority of  aviation
       fuel) were considered. As for avgas’ sales, the Notifying Parties could not estimate AFSN’s market share at each Norwegian airport (except
       for the four airports where AFSN is the only supplier of aviation fuel, where AFSN has 100% market share).[13] In any event,  as  will  be
       described below, regardless of AFSN’s market share on any of the downstream markets (that is any of the airports),  the  transaction  will
       not give rise to any competition concerns.

   27) The Notifying Parties claim that the transaction will not lead to any vertical competitive concerns. In particular, the Notifying  Parties
       claim that the merged entity will have no ability to engage in input foreclosure because currently none of AFSN’s competitors at Norwegian
       airports source their fuel from St1’s refinery in Gothenburg, Sweden. The Notifying Parties also claim that the transaction will not  give
       rise to any sort of customer foreclosure.

   28) The Commission takes the view that the transaction will not allow the Notifying Parties  to  engage  in  any  foreclosure  behaviour.  The
       arguments presented below apply similarly whether the Commission considers markets for into-plane supply for aviation fuel,  jet  fuel  or
       avgas.

   29) As to input foreclosure which would raise the costs at which competitors can operate on a downstream market, the Commission considers that
       the proposed transaction does not give rise to such concerns. St1 does not currently supply any aviation fuel (whether jet fuel or  avgas)
       to Norwegian airports, where AFSN is active. AFSN's competitors active in Norwegian airports do not rely at all on supplies from  St1  and
       will continue to have access to alternative sources of supply, as the combined market share of Shell and St1 is below 10% and St1's  share
       at ex-refinery level is extremely limited and in any case below [0-5]% under the narrowest plausible market definition.

   30) As to customer foreclosure, which would lower the expected revenue streams of upstream competitors,  the  Commission  considers  that  the
       proposed transaction does not give rise to any concerns.

   31) First, St1 currently does not supply jet fuel to Norwegian airports.

   32) Second, in all but four Norwegian airports where AFSN is active, AFSN's market share in the into-plane  supply  of  aviation  fuel  ranges
       between [30-40]% and [60-70]%. Assuming that AFSN would in the future only purchase aviation fuel from its parents,  upstream  competitors
       would still be able to sell to AFSN's competitors active at those airports.[14]

   33) Third, AFSN’s current purchases exceed significantly St1’s and Shell’s ex-refinery sales in Scandinavia. It  is  therefore  very  unlikely
       that Shell's and St1's sales in the Scandinavian region would be able to meet AFSN's demand.

   34) Finally, ex-refinery markets are at least Scandinavian-wide, if not EEA-wide  and  therefore  ST1's  and  Shell's  competitors  will  have
       sufficient other airports to supply aviation fuel to.

   35) On the basis of the above and all available evidence the concentration therefore does not give rise to serious doubts in relation  to  the
       vertically affected markets of ex-refinery sales of aviation fuel and into-plane supply of aviation fuel at various Norwegian airports.

       CONCLUSION

   36) 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)
                                        Věrá JOUROVÁ
                                        Member of the Commission

                                        -----------------------
[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]   Publication in the Official Journal of the European Union No C 165, 20.05.2015, p. 4.

[4] Form CO, para 34.

[5] Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Consolidated Jurisdictional Notice  (OJ  C95,
16.04.2008, p1).

[6] Form CO, paragraph 65.

[7] COMP/M.7387 – BP/Statoil Fuel and Retail Aviation; COMP/M.5880 – Shell/Topaz /JV; COMP/M.5422 – Statoilhydro /St1/St1  Avifuels;  COMP/M.1383
– Exxon/Mobil.

[8] COMP/M.7387 – BP/Statoil Fuel and Retail Aviation.

[9] COMP/M.7387 – BP/Statoil Fuel and Retail Aviation; COMP/M.3110 – OMV/BP.

[10] COMP/M.7387 – BP/Statoil Fuel and Retail Aviation.

[11] COMP/M.7387 – BP/Statoil Fuel and Retail Aviation; COMP/M.5880 – Shell/Topaz/JV; COMP/M.5005 –  Energia/ExxonMobil  Iberia;;  COMP/M.3291  –
Preem/Skandinaviska Raffinaderim; COMP/M.1628 – TotalFina/Elf; COMP/M.1383 – Exxon/Mobil.

[12] COMP/M.5880 – SHELL / TOPAZ / JV; COMP/M.5005 – Energia/ExxonMobil Iberia; COMP/M.3110 – OMV/BP; COMP/M.1628 – TotalFina/Elf; COMP/M.1383  –
Exxon/Mobil.

[13]  Due to the small volumes of avgas sold, Shell has no visibility over total demand at airports or whether (and if so, how much)  competitors
      sell avgas.

[14]  Considering market shares only in the into-plane supply of aviation fuel is sufficient here given that, at the ex-refinery level  jet  fuel
      and avgas belong to the same market.

-----------------------
 In the published version of this decision, some information has been omitted pursuant to 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.

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE