CELEX: 32015M7631
Language: en
Date: 2015-09-02 00:00:00
Title: Commission Decision of 02/09/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7631 - ROYAL DUTCH SHELL / BG GROUP) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 2.9.2015
C(2015) 6181 final

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|To the notifying party:                                                |                                                                       |

Dear Sir/Madam,

Subject:    Case M.7631 – Royal Dutch Shell/ BG Group
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 29 July 2015, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger  Regulation  by
   which Royal Dutch Shell plc ('Shell', UK/Netherlands), acquires within the meaning of Article 3(1)(b) of the Merger Regulation sole control of
   BG Group plc ('BG Group', UK) by way of a public bid for all the issued and to be issued share capital of BG Group[3].  Shell  is  hereinafter
   referred to as the "Notifying Party" and Shell and BG are collectively referred to as the "Parties".

       THE PARTIES

2) Shell is a global group of energy and petrochemical companies. Shell is listed on the London, Amsterdam and New York  Stock  Exchanges.  Shell
   companies have operations in more than 70 countries and territories with businesses including (i) oil  and  gas  exploration,  production  and
   marketing; (ii) manufacturing, marketing and shipping of oil products and chemicals, and (iii) renewable energy products.

3) BG Group resulted from the demerger of British Gas (the other, downstream part being Centrica) and is currently listed  on  the  London  Stock
   Exchange. BG Group has interests in over 20 countries on five continents. It has two principal business areas: (i) the Upstream  Gas  business
   segment, which covers exploration and production activities plus liquefaction operations associated  with  integrated  liquefied  natural  gas
   ("LNG") projects, and (ii) the LNG Shipping & Marketing business, which purchases, transports (by vessel), markets and sells LNG and which  is
   responsible for BG Group's regasification facilities. BG Group is also active in the production, development and upstream wholesale supply  of
   crude oil as well as in the financial trading and transportation thereof – although to a limited extent.

       THE OPERATION AND THE CONCENTRATION

4) On 8 April 2015, Shell announced its intention to acquire the entire issued and to be issued share capital of  BG  Group.  By  means  of  this
   public bid under the UK City Code on Takeovers, Shell will acquire sole control of BG Group and the proposed transaction therefore constitutes
   a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

       EU DIMENSION

5) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million[4] [Shell: EUR  480  716  million;  BG
   Group: EUR 14 707 million]. Each of them has an EU-wide turnover in excess of EUR 250 million [Shell: EUR  […]  million;  BG  Group:  EUR  […]
   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.

       RELEVANT MARKETS

6) The Parties' activities overlap at a horizontal and vertical level in relation  to  the  upstream  and  downstream  wholesale  stages  of  the
   respective oil and gas value chains.

7) In particular, the proposed transaction will give rise to horizontal overlaps with regard to the exploration for oil & gas;  the  development,
   production and upstream wholesale supply of crude oil; the financial trading of crude oil; the development, production and upstream  wholesale
   supply of natural gas; the liquefaction and upstream wholesale supply of LNG; the transportation of LNG by vessel; the trading of natural  gas
   at natural gas trading hubs, and the off-shore transportation and processing of each of oil and gas.

8) The proposed transaction will give rise to vertical relationships between the Parties' oil & gas production and  transportation  &  processing
   activities; between their crude oil supply and refining activities; between their activities in the upstream and downstream  wholesale  supply
   of natural gas, and; between their activities in the liquefaction and wholesale supply of natural gas/LNG.

9) Although not necessarily giving rise to affected markets as defined in Commission Implementing Regulation (EC)  No  139/2004,[5]  out  of  the
   aforementioned horizontally and vertically overlapping activities, the Commission will address the following markets in  detail,  given  that,
   for example, the proposed transaction would lead to market leadership of the merged entity notwithstanding the latter's limited market  share:
   (i) exploration for oil and gas reserves; (ii) development, production and upstream wholesale supply of natural gas;  (iii)  liquefaction  and
   upstream wholesale supply of LNG; (iv) off-shore transportation of gas, and (v) processing of gas.

1 Exploration for oil and gas reserves

10) The Commission has previously considered that a separate relevant product market could exist for the exploration of oil  &  gas  reserves[6],
   which it considered to be worldwide in scope.

11) The Notifying Party takes the view that if a separate relevant product market for the exploration of crude oil and natural  gas  exists,  the
   Parties' position on this market would only really be useful as a proxy for their expected future oil and gas production levels. The Notifying
   Party considers that this market, were it to exist, is worldwide in scope.

12) On the basis of the results of the market investigation carried out in  the  present  matter,  the  Commission  however  considers  that  the
   existence of a separate relevant product market for the exploration of oil & gas reserves cannot be ruled  out.  Indeed,  a  majority  of  the
   Parties' competitors have stated that they, at least occasionally, engage in the onward sale of (part  of)  certain  exploration  licenses  to
   third parties (i.e. subsequent to the conclusion of the initial bidding procedure or bilateral negotiations with the  licensor  by  which  the
   license in question was awarded), for example as part of a portfolio optimization exercise or to reduce risk by diluting their shareholding in
   certain licenses.[7]

13) The Commission has therefore assessed the Parties' position on this possible market in the competitive assessment below.

2 Development, production and upstream wholesale supply of natural gas

14) The Commission has previously considered that a separate relevant product market could exist for the  development,  production  and  upstream
   wholesale supply of natural gas to large importers/wholesalers[8]. In the Commission's most recent decision-making  practice,  the  geographic
   market was considered to be national or, potentially, slightly wider in scope (given the increasing convergence of prices across  gas  trading
   hubs in North-West Europe).[9]

15) The Notifying Party considers that one overall market for the wholesale supply of natural  gas  indeed  exists,  which  would  encompass  gas
   produced in the EEA as well as Algerian, Russian and Libyan gas imports into the EEA.

1 LNG-related markets

16) Both Parties currently have significant activities in the LNG-sphere, including liquefaction, shipping and wholesale supply.  The  Commission
   has therefore assessed in detail whether the Parties' various LNG-related activities form part of plausible separate relevant product markets.

17) LNG constitutes natural gas in liquid form, which is achieved by cooling it to approximately -162° Celsius. LNG is easier  to  store  and  to
   transport, as it takes up to 600 times less volume than natural gas in a gaseous state.

18) The Notifying Party explains that the life cycle of LNG encompasses the following stages: (i) exploration for oil & gas; (ii)  production  of
   natural gas; (iii) liquefaction of natural gas into LNG; (iv) wholesale supply of LNG; (v) LNG shipping, and; (vi) regasification  of  LNG  to
   allow entry into the natural gas grid at the port of arrival of the LNG in question.

19) Although the Parties are active across all stages of this LNG life cycle, the Notifying Party explains that LNG shipping  services  are  only
   provided internally by Shell and BG Group and that the Parties do not, therefore, compete on the potential relevant  product  market  for  the
   transportation of LNG by vessel that was previously identified by the Commission.[10]

      Wholesale supply of LNG, including possible sub-segments for long-term and short-term LNG supplies

20) In relation to LNG, the Commission has previously considered whether the wholesale supply of  LNG  by  vessel  could  constitute  a  separate
   relevant product market, which would be distinct from the supply of natural gas by pipeline.[11] In relation to this possible market  for  the
   wholesale supply of LNG by vessel, the Commission furthermore stressed that in conducting the competitive assessment, a firm's access  to,  or
   capacity rights at, import infrastructures (in particular regasification terminals) should be taken into account.[12] It considered  that  the
   possible market for the wholesale supply of LNG could either be national in scope, or encompass the entire EEA as well as Russian and Algerian
   imports.

21) The Commission has furthermore looked into whether separate relevant product markets could exist for each of  the  long-term  and  short-term
   (spot) supply of LNG.

22) The Notifying Party considers one overall product market for the wholesale supply of natural gas to exist  (i.e.  without  any  further  sub-
   segmentation), which it considers to cover gas produced in the EEA as well as Algerian, Russian and Libyan gas imports  into  the  EEA.  Given
   that the only difference between natural gas supplied by pipeline and LNG would be that the latter has been cooled to allow for sea transport,
   the Notifying Party considers LNG to constitute a transport and storage modality, rather than a separate relevant product  market.  Also,  the
   Notifying Party considers that no meaningful competition exists between the various joint venture companies that liquefy natural gas into  LNG
   and that competition rather takes place downstream, on a market for the wholesale supply of natural gas. On that market, the Parties and their
   competitors would compete both for securing offtake rights at LNG liquefaction plants as well as for the conclusion of  long-term  and  short-
   term LNG supply agreements with downstream customers (including, e.g., other wholesalers, trading firms and national importers).

23) To the extent that a separate relevant product market for the supply of LNG would exist, which it contests,  the  Notifying  Party  considers
   this to be worldwide in scope, in light of available transport capacity, a lack of import barriers and given similar  price  movements  across
   the various regions of the world.

24) In relation to the existence of such a separate relevant product market for the wholesale supply of LNG,  the  market  investigation  carried
   out in the present matter yielded mixed results.

25) First, half of the Parties' competitors that replied to the Commission's market investigation  indicated  that,  at  the  upstream  wholesale
   level, the identity of customers is the same for LNG and non-liquefied gas, the other half indicating the opposite.[13]

26) However, the majority of competitors responding to the market investigation indicated that the  prices  of  LNG  and  non-liquefied  gas  are
   different. Particularly, one respondent indicated that "In general, cost of producing LNG is higher than that of  non-liquefied  pipeline  gas
   because of the process by which LNG is brought to market:(i) extraction of natural gas and delivery of such natural gas through a pipeline  to
   a processing facility; (ii) conversion of the natural gas to liquid form in a liquefaction plant; (iii) transportation  in  specially-designed
   LNG tankers; and (iv) delivery for re-gasification at a receiving terminal at the destination country. Therefore, we view that  the  price  of
   LNG shall be higher than that of pipeline gas". Another respondent indicated that "Although there is a tendency towards  convergence,  because
   both LNG and non-liquefied (pipeline) gas constitute the basis of the same product, i.e., gas, there may be significant price differences  due
   to the fact that LNG/non-liquefied (pipeline) gas are subject to different capacity constraints".[14]

27) Also, the large majority of respondents to the Commission's market investigation indicated that LNG and non-liquefied gas are not  comparable
   in terms of flexibility, particularly given the greater flexibility of LNG deliveries. According to one respondent, "The delivery  of  LNG  is
   more flexible than the delivery of non-liquefied (pipeline) gas, as the latter is limited by the existing pipeline network",  whereas  another
   respondent indicated that "Gas sold as LNG has a higher level of flexibility due to the use of LNG vessels  which  can  be  delivered  to  any
   market with a regasification terminal. Gas sold via pipeline can only be sold to the designated markets  that  the  pipeline  has  been  built
   for".[15]

28) Finally the market investigation was  inconclusive  in  relation  to  the  question  of  whether  LNG  and  non-liquefied  gas  can  be  used
   interchangeably for the same applications. Half of the respondents to the market investigation in fact indicated that the intended use of  LNG
   and non-liquefied gas is different, whereas the other half indicated the opposite. According to one respondent, "Intended use may be the  same
   for pipeline gas or LNG, although spot LNG cargoes offer a degree of flexibility more suitable to meet high  season  demand"  whereas  another
   respondent indicated that "Although generally LNG and non-liquefied (pipeline) gas have the same end use, the more significant flexibility  in
   the delivery of LNG means that LNG is a particularly attractive option in order  to  meet  demand  in  peak  periods  and  to  make  balancing
   adjustments (supply/demand)".

29) As regards the possible narrower distinction between long-term and short-term (spot) supplies of LNG, the Commission notes that the  majority
   of the Parties' customers and competitors do not consider LNG supplied under long-term contracts and LNG-supplied on a  short-term/spot  basis
   to be comparable in terms of price/contractual conditions.[16]

30) The Commission therefore considers that indications exist that could support the finding of  a  separate  relevant  product  market  for  the
   wholesale supply of LNG (national or EEA-wide in scope), possibly being further segmented into separate relevant markets for the long-term and
   short-term wholesale supply of LNG.

      Sale of LNG to wholesalers at liquefaction facilities

31) As part of the present matter, the Commission has in addition assessed whether a separate relevant product market  for  the  liquefaction  of
   gas into LNG could exist, or whether the Parties' liquefaction capacity rather constitutes a mere proxy for their competitive  strength  in  a
   LNG wholesale supply market. The Notifying Party explains that the Parties are both active in the liquefaction of  gas  into  LNG  via  equity
   interests in various liquefaction plants across the globe, including in Nigeria, Trinidad &  Tobago,  Peru,  Egypt,  Brunei,  Malaysia,  Oman,
   Qatar, Russia and Australia. These plants are generally organised as joint venture companies due to the very high costs of  both  construction
   (billions of Euros) and operation (hundreds of millions of Euros per year). Stakeholders in these joint ventures can be both  Independent  Oil
   Companies (such as the Parties, ExxonMobil, Total, BP, Engie and others) and National Oil Companies  (e.g.  Qatargas,  for  the  large  plants
   located in Qatar). The joint venture companies operate the plants as independent companies. The control exercised over the joint  ventures  by
   the stakeholders is subject to the joint venture's shareholders' agreements, which can not only grant control to the majority stakeholder  but
   also technical veto rights to (large) minority stakeholders.

32) The fact that it is the joint venture companies that operate liquefaction plants and in which the Parties have  equity  stakes,  rather  than
   the Parties themselves, that are the direct countersigning parties to long-term LNG supply agreements with downstream LNG wholesalers  –  such
   as the Parties – could namely support the notion that the sale of LNG at LNG liquefaction plants to LNG  wholesalers  constitutes  a  separate
   relevant product market. This market would be situated upstream from the possible separate relevant product market for the wholesale supply of
   LNG. The Commission has also assessed what the geographic scope of such a potential relevant product market could be, by looking at actual and
   possible sources of LNG supply into the EEA. In this regard, the Commission notes that only one of  the  world's  liquefaction  facilities  is
   currently located within the EEA (in Norway) and that EEA LNG supplies currently largely originate from outside the EEA. This would mean  that
   from an EEA demand-side perspective, the LNG liquefaction market, were it to exist, would be limited to the EEA and certain  extra-territorial
   supply regions.

33) As mentioned above, the Notifying Party considers that no meaningful competition exists between the  various  joint  venture  companies  that
   liquefy natural gas into LNG and that competition rather takes place downstream, on a market for the wholesale supply of natural gas. On  that
   market, the Parties and their competitors would compete both for securing offtake rights at  LNG  liquefaction  plants  as  well  as  for  the
   conclusion of long-term and short-term LNG supply agreements with downstream customers (including, e.g., other wholesalers, trading firms  and
   national importers).

34) In relation to the existence of a separate relevant product market for the sale of LNG at LNG liquefaction plants (i.e. the liquefaction  and
   sale to wholesalers of LNG), the Commission notes that the majority of the Parties' competitors that responded  to  its  market  investigation
   indicate that, although some players that are active across various stages of the LNG life cycle offer bundled LNG services (i.e. combinations
   of LNG liquefaction, LNG shipping, LNG wholesale supply, and regasification of LNG), this LNG value chain is nonetheless fragmented  and  each
   of its various stages could be characterised by different suppliers, customers, prices and/or  intended  use.[17]  What  is  more,  the  large
   majority of the Parties' customers and competitors that  responded  to  the  Commission's  market  investigation  indicate  that  either  they
   themselves or their competitors do offer LNG liquefaction services on a standalone basis (i.e. without combining it either in a  bundled  form
   with any other LNG-related services nor with the LNG wholesale supply).[18] Finally, the  vast  majority  of  the  Parties'  competitors  that
   responded to the Commission's market investigation indicate that, on the one hand, certain companies are active in the wholesale supply of LNG
   without having equity stakes in liquefaction facilities while, on the other hand, companies exist that  hold  equity  stakes  in  liquefaction
   facilities without being active in the wholesale supply of LNG.[19]

35) The Commission considers that on the basis of these results, indications exist that could support the finding of a separate relevant  product
   market for the liquefaction of LNG.

36) As regards the geographic scope of this potential relevant product market for the liquefaction of LNG, the Commission found  evidence  during
   its market investigation of actual LNG supplies into the EEA having occurred during the period 2012-2014 from Western Africa,  the  Caribbean,
   the Middle East, South America, the East Coast of North America, South-East Asia and from within the EEA.[20] Some of the Parties' competitors
   in addition mention the North American West Coast, Eastern Africa and Australia as regions from which a profitable supply of LNG into the  EEA
   would be possible (although no indications exist that this actually occurred during 2012-2014). In a recent publication, the  Commission  also
   noted that excess LNG supplies from Nigeria and Qatar have returned to the Atlantic (including the EEA) as Asian spot prices have  been  on  a
   par with the price of the UK gas hub (the National Balancing Point) since February 2015.[21]  Previously,  a  significant  price  differential
   existed between these two regions which resulted in many LNG cargoes being diverted away from the EEA (and, for example,  replaced  with  spot
   gas acquired at European gas trading hubs) towards Asian markets.

37) This supports the notion that no technical barriers exist that prevent LNG liquefaction plants in the aforementioned regions being  used  for
   the supply of LNG into the EEA. In this regard, it is also important to note that the majority of the Parties' competitors indeed explain that
   the key factor that could limit firms' ability to supply LNG into the EEA from any region in the world is the price that can be  obtained  for
   delivery of LNG into the EEA relative to delivery into other regions of the world (which can in turn depend on the availability of alternative
   sources of gas supply in the EEA relative to other regions in the world).[22]

38) During the Commission's market investigation, a concern was however  raised  in  relation  to  the  merged  entity's  increased  position  in
   liquefaction capacity within a (more) limited geographic market referred to as the 'Atlantic Basin', encompassing Northern and Western Africa,
   South America, the EEA (Norway), and the Caribbean (although this concern related to a market for the wholesale supply of LNG). The fact  that
   the relevant geographic scope of the market would be more limited would in particular result from the relative difference in  transport  costs
   for the supply of LNG from, respectively, the Atlantic and Pacific  basins.  Based  on  information  provided  by  the  Notifying  Party,  the
   Commission has been able to confirm that the cost of transport of LNG into the EEA from the Atlantic Basin (which the Commission considers, on
   the basis of the results of its market investigation, to at least encompass the EEA, the North  American  East  Coast,  the  Caribbean,  South
   America and Northern and Western Africa) can be significantly lower than the cost of transport of LNG into the EEA from, in  particular,  Asia
   (including Australia) as well as, to an extent, from the Middle East (the cost of transport of LNG into the EEA from Nigeria would  amount  to
   just over [30-40] per cent of the cost of transport of LNG into the EEA from Malaysia).[23]

39) Also, the Commission's market investigation showed that no actual LNG supplies into the EEA seem to have been made from  the  North  American
   West Coast, East Africa and Australia during the period 2012-2014, which could mean that these supply regions do not  form  part  of  the  LNG
   liquefaction market insofar as the EEA is concerned.[24]

40) In light of these results, the Commission considers that indications exist that the  potential  separate  relevant  product  market  for  the
   provision of LNG liquefaction capacity could be limited to the so-called Atlantic basin (encompassing the EEA, the North American East  Coast,
   the Caribbean, South America, and Western Africa), or   possibly also including the Middle East and South Eastern  Asia  (i.e.  excluding  the
   North American West Coast, East Africa and Australia).

2 Conclusion on LNG-related markets

41) In light of the above, the Commission considers that some indications exist that could support  the  finding  of  separate  relevant  product
   markets for the liquefaction of LNG (at least including liquefaction plants located in the EEA, the North American East Coast, the  Caribbean,
   South America and Northern and Western Africa, but possibly including liquefaction plants located in the Middle East and South Eastern Asia in
   addition) as well as for the wholesale supply of LNG (national or EEA-wide), the latter market possibly being further sub-segmented into long-
   term and short-term (spot) supplies thereof. In any event, the precise delineation of the relevant product markets involving LNG can  be  left
   open as the proposed transaction does not give rise to serious doubts as to its compatibility with the internal  market  under  any  plausible
   product and geographic market definition.

3 Offshore transportation of oil & gas by pipeline

42) The Commission has previously considered that separate relevant product markets could exist for the offshore transportation of (i) crude  oil
   by pipeline[25] and (ii) natural gas by pipeline[26]. The geographic scope of these two markets was considered to be limited to the respective
   North North Sea ("NNS" – north of latitude 55°), South North Sea ("SNS") and Norway regions. The Notifying Party agrees with these product and
   geographic market definitions.

4 Oil & gas processing activities

43) The Commission has previously considered that separate relevant product markets could exist for (i) the processing of crude oil and (ii)  the
   processing of natural gas[27]. The geographic scope for these markets would be the respective North Sea regions (NNS, SNS,  and  Norway).  The
   Notifying Party agrees with this approach.

       COMPETITIVE ASSESSMENT

44) Below, the effects on competition are assessed for the above mentioned significant overlaps. The only horizontally  affected  market  is  the
   possible market for the liquefaction of LNG, while the only vertically affected markets are this possible  LNG  liquefaction  market  and  the
   related, possible market for the wholesale supply of LNG. The Commission has  in  addition  looked  into  those  markets  where  the  proposed
   transaction would, for example, create an industry leadership position for the merged entity – notwithstanding low post-merger  market  shares
   due to the fragmented nature of the markets involved. As regards the possible LNG markets, the Notifying Party itself indeed considers that it
   will strengthen an industry leadership position through the proposed transaction[28]. Finally, the Commission has looked into whether  certain
   of the Parties' gas transportation and processing infrastructure in the North Sea could be used to foreclose competing upstream wholesalers of
   gas active in that region.

45) In light of the foregoing, a competitive assessment of possible horizontal non-coordinated effects is  made  in  the  following  sections  in
   respect of (i) exploration for oil and gas reserves, (ii) liquefaction of LNG, and (iii) upstream wholesale supply of LNG.  Possible  vertical
   non-coordinated effects are assessed for (iv) liquefaction of LNG – upstream wholesale supply of LNG,  and  (v)  production,  development  and
   wholesale supply of natural gas – processing & transportation of gas.

1 Horizontal non-coordinated effects.

46) The Commission has published guidelines on the assessment of horizontal mergers (the "horizontal guidelines").[29] These guidelines,  and  in
   particular their part IV, form the basis for the analysis below.

1 Exploration for oil and gas

47) The Commission notes at the outset that on a possible worldwide market for the  exploration  for  oil  and  gas,  given  that  a  significant
   proportion of global exploration licenses are awarded by national governments to their national oil  &  gas  companies  ("NOCs"),  the  actual
   addressable market for the Parties and their main competitors could be limited to exploration licenses the award of which can also be competed
   for by so-called independent oil & gas companies ("IOCs").

48) The Notifying Party acknowledges that, indeed, in certain jurisdictions exploration licenses are exclusively awarded  to  NOCs  and  it  has,
   therefore, also provided market share data in which these jurisdictions are not taken into account.[30] Notwithstanding, it considers that the
   proposed transaction will not have any impact on competition on this market given its very fragmented nature and the marginal combined  market
   share of the Parties under any possible measure.

49) The Commission's market investigation carried out in the present matter provided indications for the notion that, indeed, NOCs  and  IOCs  do
   not compete subject to the same conditions. In fact, the majority  of  the  Parties'  competitors  contacted  in  the  course  of  the  market
   investigation indicated that NOCs and IOCs do not compete on the same terms. However, some respondents to the market  investigation  indicated
   that effective competition between NOCs and IOCs may exist if NOCs are participating in tenders for projects outside their home nations.[31]

50) In light of the foregoing, the Commission takes the view that it may be appropriate to limit the relevant, addressable market to  exploration
   licenses the award of which can also be competed for by IOCs.

51) Taking into account the above, Table 1, below, sets out the  Parties'  position  relative  to  other  major  IOCs  on  a  possible  worldwide
   exploration market (including NOCs), taking into account different measures of success that seem to be used in the marketplace. It can be seen
   that a number of strong IOC competitors that are equivalent in size to (or larger than) the merged entity will, post-transaction, continue  to
   exert significant competitive pressure upon the merged entity.

|Table 1 - Exploration for oil & gas                                                                                  |
|                    |Proven reserves (million barrels) |Expenditure (USD million)   |Licenses won (field acreage,    |
|                    |                                  |                            |km²)                            |
|                                                                                                                                             |
|                    |Worldwide                                                            |EEA                                               |
|                    |Liquefaction capacity                |Sales volume                   |Sales volume (% and     |Regasification capacity |
|                    |(% and mtpa)                         |(% and mtpa)                   |mtpa)                   |(% and bcm/a)           |

    |2013 |2020 |2014 |2018/
   2020 |2014 |2020 |2014 |2020 | |Shell |[20-30]%
   ([…])
    |[10-20]%
   ([…])
    |[5-10]% ([…]) |[5-10]%
   ([…]) |[5-10]% ([…]) |[0-5]%
   ([…]) |[0-5]%
   ([…]) |[0-5]%
   ([…]) | |BG Group |[0-5]%
   ([…]) |[0-5]%
   ([…]) |[0-5]% ([…]) |[10-20]%
   ([…]) |[0-5]% ([…]) |[0-5]% ([…]) |[0-5]%
   ([…]) |[0-5]%
   ([…]) | |Combined entity |[20-30]%[60]
   ([…]) |[10-20]%
   ([…]) |[10-20]%[61] ([…]) |[10-20]%
   ([…]) |[5-10]%
   ([…]) |[5-10]%
   ([…]) |[0-5]%
   ([…]) |[0-5]%
   ([…]) | |BP |[10-20]%[62]
   ([…]) |[5-10]%
   ([…]) |[0-5]%
   ([…]) |-[63] |- |- |- |- | |Exxon
   Mobil
 |[20-30]%
   ([…]) |[10-20]%
   ([…]1) |[5-10]% ([…]) |- |[20-30]%
   ([…]) |- |[0-5]%
   ([…]) |[0-5]% ([…]) | |Engie |-- |-- |[0-5]% ([…]) |- |[10-20]%
   ([…]) |- |[10-20]% ([…]) |[10-20]% ([…]) | |Total |[20-30]%
   ([…]) |[20-30]%
   ([…]) |[0-5]% ([…]) |- |[0-5]%
   ([…]) |- |[0-5]%
   ([…]) |[0-5]% ([…]) | |

   i. View of the Notifying Party

52) The Notifying Party claims that the proposed transaction will not have any impact on competition on this market.

53) First, the Notifying Party claims that it is not appropriate to analyse their market power on this market taking as proxy their  position  at
   the liquefaction level. The Notifying Party submits that at the wholesale level the only relevant volumes of LNG  are  those  upon  which  the
   Parties have commercial control over, therefore only those that they off take directly  from  liquefaction  JVs  where  they  have  an  equity
   interest or those that they contract from other liquefaction JVs.

54) On the basis of this claim, the Notifying Party submits that,  post-transaction,  the  Parties'  combined  market  share  would  be  limited,
   estimated at [10-20]% worldwide and [5-10]% EEA wide.

55) Second, the Notifying Party claims that the market share increment brought about  by  the  proposed  transaction  is  minimal.  In  fact,  at
   worldwide level BG Group has an estimated market share of [0-5]% and at EEA level of [0-5]%. Also, the Notifying Party submits  that  on  this
   market there are a number of competitors of comparable strength.

56) Finally, the Notifying Party claims that LNG competes also with natural gas sold by pipeline and that the imports of LNG  into  the  EEA  are
   substantially lower than the potential imports which could be brought in.

57) In light of the above, the Notifying Party submits that  the  proposed  transaction  will  not  give  rise  to  an  affected  market  on  the
   hypothetical market for the wholesale supply of LNG.

   ii. Assessment

58) Respondents contacted in the course of the Commission's market investigation provided indications that support the notion that,  indeed,  the
   possible market for the upstream wholesale supply of LNG is very fragmented and competitive in nature.

59) In fact, the vast majority of customers contacted indicated that a number of competitors, such as  ExxonMobil,  are  considered  stronger  or
   equally strong as the Parties on the market for the upstream wholesale supply of LNG.

60) Also, the Commission considers (based on the results of its market investigation) that – notwithstanding the  fact  that  the  merged  entity
   will hold a large worldwide market share among IOCs – post transaction the market will  remain  competitive  (at  all  alternative  geographic
   levels). In fact, a number of competitors with similar market shares will remain post transaction, such as KOGAS ([10-20]%),  ExxonMobil  ([5-
   10]%) and Tepco ([5-10]%). The market investigation gave similar indications: the vast majority of the Parties' customers  that  responded  to
   the Commission's market investigation indicated that neither Shell nor BG Group are considered as essential suppliers of LNG into the EEA  and
   that the market is highly fragmented and competitive.[64] For example, one respondent indicated  that:  "No  company  or  suppliers  [sic]  is
   indispensable in the LNG market as it is widely diversified". Another respondent mentioned that: "The EEA has access to a number of global LNG
   suppliers other than Shell".[65]

61) Moreover, a majority of the Parties' competitors that responded to the Commission's market investigation indicate that a  number  of  players
   have entered the market for the wholesale supply of LNG in the last five years and that entry of new players is expected.[66] According to the
   respondents to the Commission's market investigation, this can be due to the increase in global (and EEA) demand of LNG.  To  this  effect,  a
   respondent to the market investigation indicated that "new entrants are expected to participate in the future to the EEA and  global  gas  and
   LNG markets". Another one explained that "as the LNG demand in the world (including the EEA) is expected to be doubled for the next decade, we
   suppose that a number of LNG players would try to enter into the EEA for seeking new business opportunities".[67]

62) Another factor that is relevant to take into account in assessing the Parties' position on a possible market for the wholesale supply of  LNG
   into the EEA is their regasification capacity. The Parties' activities in this segment are limited  given  the  fact  that  regasification  is
   mostly done by the Parties' LNG customers, i.e. the downstream wholesalers. The Parties do not control any regasification terminal in the  EEA
   and have only limited contracted capacity usage that leads to an EEA-wide share in regasification capacity of  only  [0-5]%  in  2014.[68]  On
   potential narrower national markets the Parties' activities do not overlap at all. The Commission  accordingly  considers,  in  light  of  the
   Parties' limited individual and combined share of the upstream wholesale supply of LNG in the EEA (including  at  national  level),  that  the
   proposed transaction is unlikely to create or strengthen any position of significant market power on the part of the Notifying Party.

63) Finally, a majority of the Parties' customers and competitors that replied  to  the  Commission's  market  investigation  consider  that  the
   proposed transaction will not have an impact on the price level within the EEA for LNG supplied either  under  long-term  contracts  or  under
   short-term contracts and on a spot basis.[69] In line with these responses, it is also noteworthy that only one of  the  Parties'  competitors
   and only one of their customers expected the proposed transaction to change the degree to which the various existing pricing  mechanisms  (oil
   indexation, gas hub indexation, price corridors, etc.) are used in their portfolio of long-term LNG supply  contracts.[70]  These  results  go
   against any finding of anti-competitive effects resulting from the – in any event limited – increase in  the  Notifying  Party's  position  on
   hypothetical worldwide and possible EEA-wide (as well as on the various possible national) markets for the upstream wholesale  supply  of  LNG
   resulting from the proposed transaction.

64) In light of the above, the Commission takes the view that, post-transaction, the merged entity will not enjoy a significant degree of  market
   power and will continue to face fierce competition from a large number of existing players on the market. Also, the Commission expects that in
   the near future competition will be even fiercer in the light of likely entry of new players on this market.

65) Therefore, the Commission considers that the proposed transaction does not give rise to serious doubts  as  to  its  compatibility  with  the
   internal market in relation to a possible worldwide or EEA-wide market for the upstream wholesale supply of LNG.

2 Non-horizontal non-coordinated effects

66) The Commission has published guidelines on the assessment of non-horizontal mergers (the "non-horizontal guidelines").[71] These  guidelines,
   and in particular their part IV.A, form the basis for the analysis below.

1 Sale of LNG to wholesalers at liquefaction facilities – Upstream wholesale supply of LNG

67) The proposed transaction could give rise to vertically affected markets involving the liquefaction of LNG and the upstream  wholesale  supply
   of LNG only in case the possible upstream liquefaction market were to be limited to the  Atlantic  basin.  As  already  mentioned  above,  the
   results of the Commission's market investigation run counter to the finding of such a narrow geographic liquefaction market. Accordingly,  the
   Notifying Party is unlikely to, post-merger, have an ability  to  engage  in  anti-competitive  input  foreclosure  in  relation  to  its  LNG
   liquefaction capacity.[72]

68) As already explained, a concern was raised  during  the  Commission's  market  investigation  in  relation  to  this  vertical  relationship.
   Essentially, the combined entity would have a merger-specific ability and  incentive  to  engage  in  anti-competitive  input  foreclosure  by
   refusing to supply LNG at liquefaction facilities within the Atlantic basin, where the merged entity would  control  more  than  half  of  the
   overall liquefaction capacity (or by worsening the conditions of such supply). Given that no alternative sources  of  supply  of  liquefaction
   capacity would exist within this Atlantic basin, and given that liquefaction facilities in other regions  of  the  world  would  not  allow  a
   competitive supply of LNG into the EEA, the merged entity would be able to increase prices on the market for the upstream wholesale supply  of
   LNG into the EEA. This input foreclosure strategy would ultimately result in negative effects on EEA consumers, as increased LNG prices  would
   be passed on to operators on the downstream wholesale and retail gas supply markets in the EEA, especially during times of peak gas demand  as
   LNG would constitute the cheapest form of flexible gas supply. Finally, the long-term character of most of  the  existing  offtake  agreements
   covering the merged entity's Atlantic basin liquefaction capacity would not be able to prevent foreclosure; on the one hand, the merged entity
   would not necessarily respect its obligations under them while, on the other hand, the expiry date of these contracts  would  not  necessarily
   lie in the long-term.

   i. View of the Notifying Party

69) The Notifying Party considers that post transaction it would neither have  the  ability  nor  the  incentive  to  engage  in  such  an  input
   foreclosure strategy. This is because of the following reasons.

70) First, the Notifying Party claims that the combined entity will not have any market power on a hypothetical market for LNG liquefaction,  and
   therefore the combined entity will not have the ability to foreclose access to liquefaction capacity. The Notifying Party in fact claims  that
   any attempt to foreclose would be countered by the significant liquefaction capacity in third parties hands, both in the  Atlantic  Basin  and
   globally.[73]

71) Second, the Notifying Party claims that the combined entity will not have an incentive to foreclose because:

a.  LNG is constrained by the supply of natural gas by pipeline. Therefore a hypothetical foreclosure  strategy  would  not  have  a  significant
   impact on LNG prices; and,

b. for a foreclosure strategy to be successful, the combined entity should have a significant share on the downstream market  so  as  to  capture
   the sales lost by the foreclosed competitors. However the combined entity will have a low market share on the downstream market.

   ii. Assessment

72) The Commission takes the view that the combined entity will not have any merger-specific ability or incentive  to  foreclose  customers  from
   access to LNG offtake rights at liquefaction plants in the Atlantic Basin.

73) The Commission first of all refers to section 5.1.2 above, where it sets out why the Notifying Party is unlikely to,  post-merger,  hold  any
   form of market power on a possible LNG liquefaction market, regardless of its precise geographic scope.

74) Particularly relevant in this regard is the fact that some of the customers that would be the subject of such an attempted input  foreclosure
   strategy are the very parties that hold technical veto rights over the behaviour of the largest  part  of  the  merged  entity's  liquefaction
   capacity within the Atlantic basin. These downstream customers of the Notifying Party would, accordingly, likely have the ability to frustrate
   an attempted foreclosure. Also, the Commission notes that a large number of additional, third-party  controlled  liquefaction  facilities  are
   currently under construction within the Atlantic basin which should provide significant alternative supply sources to the companies that would
   be the subject of an attempted foreclosure. Finally, the contractual conditions of the long-term offtake agreements in the Atlantic basin also
   prevent the Notifying Party from engaging in input foreclosure post-transaction. This is because, as described in [paragraph  71]  above,  (i)
   contracts cannot be unilaterally terminated, (ii) price revisions  are  subject  to  material  changes  in  the  price  basis  and/or  lengthy
   arbitration procedures, and (iii) current contracts come up for renewal only at a much later stage and at different points  in  time  and  the
   available uncontracted capacity in third-party hands in the Atlantic basin is forecasted to significantly exceed the demand represented by any
   (group of) hypothetically foreclosed customers of the merged entity. Therefore, the capacity controlled by the Notifying Party is not  pivotal
   for downstream customers either. Accordingly, the Notifying Party is unlikely to, post-merger, have the ability to engage in  anti-competitive
   input foreclosure in respect of its liquefaction capacity in the Atlantic basin.

75) In addition, the Commission notes that the ability of the merged entity to engage in input  foreclosure  is  in  this  respect  largely  pre-
   existent to the proposed transaction, given that it will only acquire an additional veto right over […] as a result of  the  addition  of  the
   Parties' respective equity stakes therein. This would increase its upstream share of liquefaction capacity by around [10-20]% in 2014 and only
   by around [5-10]% by 2020[74].

76) At the same time, the increment in the Notifying Party's current and projected future (2020) share of the  possible  market(s)  on  which  it
   would try to recoup foregone losses upstream[75] resulting from the proposed  transaction  amounts  to  less  than  [0-5]%.  Accordingly,  the
   proposed transaction is unlikely to bring about any significant change in the Notifying Party's ability  and  incentive  to  engage  in  input
   foreclosure in relation to the liquefaction capacity over which it holds a technical right of veto within the Atlantic basin.

77) Another reason why the Notifying Party is unlikely to, post-merger, have the ability or the incentive to  engage  in  anti-competitive  input
   foreclosure, is that its post-merger shares[76] of the relevant downstream markets on which it would attempt to expand sales  and  (eventually
   or immediately) increase prices amount to – at most – [10-20]%[77] (on the possible EEA and national LNG supply markets and on the various EEA
   gas trading hubs).[78] Accordingly, the base of sales on which the Notifying Party would enjoy  increased  margins  is  in  any  event  highly
   limited, reducing its incentive to attempt any foreclosure.

78) What is more, the large majority of the Parties' customers and competitors that replied to the  Commission's  market  investigation  consider
   that the global and EEA markets for the supply of LNG are characterised by excess  production,  liquefaction  and  supply  capacity  (and  are
   forecasted to remain so between now and 2020).[79] A  similar  majority  of  customers  and  competitors  also  considers  that  the  proposed
   transaction will not have an impact on the price level within the EEA for LNG supplied either under long-term contracts  or  under  short-term
   contracts and on a spot basis.[80] These results support the Commission's view that the proposed transaction is unlikely to  confer  upon  the
   Notifying Party the ability and incentive to engage in anti-competitive input foreclosure in relation to its liquefaction capacity within  the
   Atlantic basin.

79) In light of all of the foregoing, the Commission considers that the proposed transaction does not give rise  to  serious  doubts  as  to  its
   compatibility with the internal market as a result of any foreclosure concerns arising on the vertically  related  possible  markets  for  the
   liquefaction of LNG and the upstream wholesale supply of LNG.

2 Production, development and wholesale supply of natural gas – processing of gas in the SNS

80) Although this vertical relationship does not give rise to affected markets under any alternative plausible market definition, the  Commission
   notes that the proposed transaction will bring together Shell's interest in  the  SEAL  Bacton  gas  processing  terminal  (the  'Seal  Bacton
   terminal')[81], located in the SNS, and BG Group's interest in the Elgin Franklin gas field, located  in  the  NNS[82].  The  Commission  also
   understands that any gas produced at any of the gas fields connected to the SEAL Bacton terminal has to be treated there before it is  fit  to
   be entered into the UK national gas grid. It furthermore understands that the SEAL pipeline connects the SEAL Bacton terminal with inter  alia
   the Elgin Franklin gas field (as well as with the Shearwater gas field).  Accordingly,  the  Commission  has  assessed  whether  the  proposed
   transaction could give rise to concerns of vertical foreclosure – notwithstanding that it does not involve any affected markets in  the  North
   Sea.

   i. View of the Notifying Party

81) The Notifying Party considers that this vertical relationship will not give rise to any concerns of anti-competitive foreclosure, given  that
   the combined entity would not have the incentive to foreclose. The Notifying Party submits that this is for the following reasons:

a. The market for the production of natural gas is worldwide in geographic scope. In order for the combined entity to benefit from any  foreclose
   strategy at the upstream natural gas production level of the supply chain, it would therefore need to have  sufficient  market  power  in  the
   global market for the production of natural gas. The Notifying Party submits that this is not the case, given that the Parties combined  share
   of natural gas production worldwide in 2014 was only c. [0-5]% (with an increment of c. [0-5]%).

b. A foreclosure strategy would also mean that the combined entity would forego the fees  payable  by  third  parties  to  use  the  SEAL  Bacton
   terminal – given the time and cost involved in setting up and operating a gas terminal,  these  are  important  to  the  terminal’s  financial
   viability. A foreclosure strategy would therefore only make sense if the combined entity expected to make a sufficiently  large  gain  at  the
   upstream level to outweigh the loss of revenues downstream. The Notifying Party submits that the combined entity would not be able to do so in
   the worldwide market for the production of natural gas.

c. The proposed transaction does not result in any change to the status quo as BG Group does not have any ownership interest in the  SEAL  Bacton
   terminal.

   ii. Assessment

82) The Commission considers that it is first of all important to note that, according to the Notifying  Party,  the  SEAL  Bacton  terminal  was
   purpose-built for the owners of the SEAL pipeline (which connects the terminal with the Elgin Franklin and Shearwater gas fields)  and  it  is
   those owners that control access to the terminal in accordance with the operating provisions relating to the SEAL pipeline. […].  Shell  would
   not have the ability to veto any decision of the SEAL pipeline owners to enforce the terms of these contractual arrangements.[83] Although  it
   is the owners of the SEAL pipeline that control access to the  SEAL  Bacton  terminal,  the  Commission  has  assessed  whether  the  proposed
   transaction would nonetheless allow the Notifying Party to foreclose access to the SEAL Bacton terminal for competing producers at  the  Elgin
   Franklin gas field, through the Parties' existing ownership interests in the SEAL pipeline.

83) In relation to this SEAL pipeline, the Commission understands that Shell's  and  BG  Group's  existing  veto  rights  on  the  allocation  of
   capacity[84] (the Parties have respective interests in the SEAL pipeline of [10-20]% and [5-10]%) apply only to  the  respective  portions  of
   this pipeline that have been reserved to each of the Elgin Franklin and Shearwater  gas  fields.[85]  Accordingly,  notwithstanding  that  the
   proposed transaction would bring together Shell's interest in the SEAL Bacton terminal with the Parties' respective upstream interests in  the
   Elgin Franklin and Shearwater gas fields, it does not involve any merger-specific change in any hypothetical ability to  foreclose  access  to
   the SEAL Bacton terminal and SEAL pipeline. Indeed, the degree of vertical integration in the ownership of the various  infrastructure  assets
   together making up the individual, ring-fenced evacuation routes of the Elgin Franklin and Shearwater gas fields will  be  unaffected  by  the
   proposed transaction.

84) For completeness sake, the Commission notes that, according to information provided by the Notifying Party, at the time of development  of  a
   gas field, operators thereof can choose to connect to any of the existing evacuation routes in the area and therefore from any of the five gas
   processing facilities currently existing within the SNS. At that stage, competition would accordingly exist between gas processing  facilities
   and Shell cannot be said to have the ability to foreclose access thereto for new gas fields as it controls only one out of five gas processing
   facilities in the SNS. Finally, the SEAL Bacton terminal offers a spare capacity that significantly exceeds its total existing and  forecasted
   annual throughput during 2013-2017 (and which amounted to more than half of total gas production in the SNS in  2014),  while  gas  production
   levels in the SNS are forecasted to decline between now and 2020.[86] Also, no concerns were raised in respect of any of the Parties' oil  and
   gas transportation and processing assets during the Commission's market investigation.

85) In light of all of the foregoing, the Commission considers that the proposed transaction does not give rise  to  serious  doubts  as  to  its
   compatibility with the internal market as a result of the combination of the Parties' oil processing and production assets in the UK North Sea
   (SNS).

3 Production, development and wholesale supply of natural gas – transaction processing of gas in Norway (North Sea)

86) Similar to the previous section, although this vertical relationship does not give rise to affected markets under any  alternative  plausible
   market definition, the Commission notes that the proposed transaction will combine Shell's interest in the  SEGAL  St  Fergus  gas  processing
   terminal and the FLAGS gas pipeline on the one hand[87], with BG Group's interest in the  Knarr  gas  field  (which  uses  the  aforementioned
   infrastructure as its evacuation route) on the other hand[88]. Both are located in the Norway region of the North Sea. For  that  reason,  the
   Commission has assessed whether the proposed transaction could give rise to concerns of vertical foreclosure – notwithstanding  that  it  does
   not involve any affected markets in the North Sea.

   i. View of the Notifying Party

87) The Notifying Party considers that this vertical relationship will not give rise to any concerns of anti-competitive foreclosure, given  that
   the combined entity will not have the ability to foreclose. According to the Notifying Party, this is for the following reasons:

a. If a producer wants to evacuate gas in the UK North Sea, it has the option of linking its gas field to any of the pipelines and  terminals  in
   the region – there is therefore competition between pipelines and terminals at this stage.

b. Once a field has chosen its evacuation route, the field owners will benefit from contractual protections.  The  operator  and  owners  of  the
   Knarr gas field entered into contractual arrangements to evacuate their gas via the FLAGS pipeline and the SEGAL St Fergus gas terminal in […]
   – they will therefore be protected by these long - term contract arrangements, which the combined entity will have no ability to alter; and,

c. The proposed transaction does not result in any change to the status quo as BG Group does  not  have  any  ownership  interest  in  the  FLAGS
   pipeline or the SEGAL St Fergus terminal.

   ii. Assessment

88) The Commission found that the proposed transaction does not give rise to any foreclosure concerns in respect of this  vertical  overlap.  The
   existing and forecasted spare capacity at the SEGAL St Fergus gas processing terminal and the FLAGS gas pipeline namely  significantly  exceed
   the existing and forecasted production levels at the Knarr gas field. Any unforeseen increases in production at the Knarr gas field  that  are
   not protected by the existing contractual arrangements between the SEGAL owners and operators and the Knarr owners and operators are therefore
   likely to represent only a very minor proportion of the spare capacity at the relevant evacuation infrastructure.[89] Given that this vertical
   relationship is furthermore largely pre-existent to the proposed transaction – the Notifying Party already has upstream interests  in  several
   gas fields connected to the SEGAL St Fergus gas processing terminal and the FLAGS gas pipeline – while  the  Notifying  Party  indicates  that
   access requests to this infrastructure have never been refused in the last 10 years, the addition of the Knarr field does not give rise to any
   merger-specific change in its ability or incentive to foreclose access to  the  aforementioned  infrastructure.  Also,  as  mentioned  in  the
   previous section, no concerns were raised in respect of any of the Parties' oil and  gas  transportation  and  processing  assets  during  the
   Commission's market investigation.

89) In light of all of the foregoing, the Commission considers that the proposed transaction does not give rise  to  serious  doubts  as  to  its
   compatibility with the internal market as a result of the combination of the Parties' oil processing  and  production  assets  in  the  Norway
   region of the North Sea.

       CONCLUSION

90) 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

-----------------------
[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 256, 05.08.2015, p. 13.
[4]   Turnover calculated in accordance with Article 5 of the Merger Regulation.
[5]   As amended by Commission Implementing Regulation (EU) No 1269/2013, OJ L 336 of 14.12.2013, p.1. See Annex I, point 6.3.
[6]   COMP/M.6910 – Gazprom / Wintershall / Target Companies (2013); COMP/M.6801 – Rosneft / TNK-BP (2013);  COMP/M.5585  –  Centrica  /  Venture
Production (2009); COMP/M.4545 – Statoil / Hydro (2007).
[7]   Reply to Questionnaire 2 – Competitors, question 4.
[8]   COMP/M.6910 – Gazprom / Wintershall / Target Companies (2013); COMP/M.6801 – Rosneft / TNK-BP (2013);  COMP/M.5585  –  Centrica  /  Venture
Production (2009); COMP/M.4545 – Statoil / Hydro (2007).
[9]   COMP/M.6910 – Gazprom / Wintershall / Target Companies (2013).
[10]  COMP/M.5944 – Osaka/UFG/InfrastructureArzak/Saggas (2010).
[11]  COMP/M.6910 – Gazprom / Wintershall / Target Companies (2013); COMP/M.6477 –  BP  /  Chevron  /  ENI  /  Sonangol  /  Total  /  JV  (2012);
COMP/M.5585 – Centrica / Venture Production (2009); COMP/M.5220 – ENI / Distrigaz (2008); COMP/M.4545 – Statoil / Hydro (2007).
[12]  COMP/M.6477 – BP / Chevron / ENI / Sonangol / Total / JV (2012).
[13]  Reply to Questionnaire 2 – Competitors, question 6.
[14]  Reply to Questionnaire 2 – Competitors, question 6.
[15]  Reply to Questionnaire 2 – Competitors, question 6.
[16]  Replies to Questionnaire 1 – Customers, question 9; Reply to Questionnaire 2 – Competitors, question 9.
[17]  Replies to Questionnaire 2 – Competitors, question 7.
[18]  Replies to Questionnaire 1 – Customers, question 3; Replies to Questionnaire 2 – Competitors, question 5.
[19]  Replies to Questionnaire 2 – Competitors, questions 8.2 and 8.3.
[20]  Replies to Questionnaire 2 – Competitors, question 13.
[21]  European Commission (DG Energy Market Observatory for Energy) Quarterly Report on European Gas Markets, Volume 8 (issue  1,  first  quarter
of 2015), p. 19.
[22]  Replies to Questionnaire 2 – Competitors, question 16.
[23]  Notifying Party's response to the Commission's request for information of 30 July 2015.
[24]  Replies to Questionnaire 2 – Competitors, question 13.
[25]  COMP/M.2745 – Shell / Enterprise Oil (2002); COMP/M.1573 – Norsk Hydro / Saga (1999).
[26]  COMP/M.2745 – Shell / Enterprise Oil (2002).
[27]  COMP/M.2745 – Shell / Enterprise Oil (2002).
[28]  Internal business document of the Notifying Party of 05.04.2015, Para. 79.
[29]  OJ No C 31, 5 February 2004, p. 5.
[30]  Form CO, Annex 4.
[31]  Replies to Questionnaire 2 – Competitors, question 24.
[32]  The figures for licences won are subject to significant fluctuations. The Parties’ combined share in 2013 was [10-20]%, for  part  of  2015
it amounts to [20-30]% (field acreage […] km²). However, there are still strong competitors, in 2015 e.g. ENI with [5-10]% and Statoil  with  [5-
10]% (also for part of 2015).
[33]  Form CO, para. 6.12.
[34]  Replies to Questionnaire 1 – Customers, question 18.
[35]  Replies to Questionnaire 2 – Competitors, question 20.
[36]  Replies to Questionnaire 1 – Customers, question 40.3; Replies to Questionnaire 2 – Competitors, question 41.
[37]  Form CO, para 6.113.
[38]  Replies to Questionnaire 2 – Competitors, question 23.
[39]  Replies to Questionnaire 2 – Competitors, question 25.
[40]  Form CO, Table 6.21.
[41]  […].
[42]  Notifying Party's response to the Commission's request for information of 30 July 2015.
[43]  European Commission (DG Energy Market Observatory for Energy) Quarterly Report on European Gas Markets, Volume 8 (issue  1,  first  quarter
of 2015), p. 19.
[44]  Form CO, Table 6.19.
[45]  Form CO, Table 6.34.
[46]  Form CO, para. 6.176.
[47]  Notifying Party's response to Commission's request for information of 30 July 2015, Table 6.1.
[48]  Annex 1 to Notifying Party's response to the Commission's request for information of 30 July 2015.
[49]  Replies to Q2 – Competitors, question 35.
[50]  Replies to Q2 – Competitors, question 36.
[51]  Notifying Party's response to the Commission's request for information of 30 July 2015.
[52]  Annex 1 to Notifying Party's response to the Commission's request for information of 30 July 2015.
[53]  Notifying Party's response to the Commission's request for information of 30 July 2015.
[54]  Notifying Party's response to the Commission's request for information of 30 July 2015.
[55]  Replies to Questionnaire 1 – Customers, questions 39 and 40; Replies to Questionnaire 2 – Competitors, questions 39 and 40.
[56]  Replies to Q2 – Competitors, question 29.
[57]  Replies to Questionnaire 1 – Customers, question 25; Replies to Questionnaire 2 – Competitors, question 27.
[58]  In relation to national markets where the Parties' activities overlap.

[59]  Given that the largest part of the world's LNG liquefaction capacity and LNG wholesale supplies are contracted on a very  long-term  basis,
and given that liquefaction plants have a long lead time for their construction (recent projects are expected to require  around  four  years  to
construct, costing many billions of dollars) while the coming on-stream of a single liquefaction  plant  can  significantly  impact  a  company's
market position due to their large capacity, the Commission considers that future, projected liquefaction and supply market shares can provide  a
relevant and sufficiently reliable indication of the expected future market power of companies in the LNG-sphere.
[60]  These figures are calculated by attributing to the Parties 100% of the available capacity of each of the  plants  over  which  the  Parties
have control or a technical right of veto. The Notifying Party itself takes the view that this leads to  multiple-counting  of  capacity  and  is
therefore significantly overstating the Parties’ position in liquefaction. Accordingly, this market share should  be  considered  the  worst-case
scenario.
[61]  In its Internal Documents the Notifying Party also uses the term 'delivered volumes' which would be […] mtpa for Shell and […] mtpa for  BG
Group in 2014. However, as these figures combine the liquefaction level with the wholesale supply level, the Notifying Party claims that this  is
not an appropriate measurement for market strength.
[62]  Figures for competitors are calculated differently from those of the Parties. This is  because  the  Notifying  Party  claims  to  have  no
knowledge of the Parties’ competitors’ control/veto rights in the liquefaction plants  they  have  interests  in.  Therefore,  each  competitor’s
capacity is calculated by multiplying its equity stake in each liquefaction plant with the overall capacity of the respective plant.
[63]  The Notifying Party was unable to calculate competitors' future supply volumes (based on existing contracts).
[64]  Replies to Questionnaire 1 – Customers, questions 28 and 29.
[65]  Replies to Questionnaire 1 – Customers, question 28.
[66]  Replies to Questionnaire 2 – Competitors, question 33.
[67]  Replies to Questionnaire 2 – Competitors, question 34.2.
[68]  Form CO, Table 6.29.
[69]  Replies to Questionnaire 1 – Customers, questions 39 and 40; Replies to Questionnaire 2 – Competitors, questions 39 and 40.
[70]  Replies to Q2 – Competitors, question 29.
[71]  OJ No C 265 of 18.10.2008, p. 6.
[72]  Non-horizontal guidelines, para. 35.
[73]  Submission on Atlantic Basin Liquefaction Capacity (incorporating responses to RFI dated 19 August 2015), paragraph 1.4.
[74]  Form CO, Table 6.21.
[75]  I.e the markets for the wholesale supply of LNG in the EEA (or at national level) or its existing share for the trading of natural  gas  on
hubs in the EEA (where spot LNG would be sold).
[76]  The previous paragraph was about the increment in those market shares.

[77]  Although the Notifying Party's post-merger share of the possible Spanish market for  the  upstream  wholesale  supply  of  LNG  would  have
amounted to [10-20]% – which is still limited in size – this is forecasted to be limited to [5-10]% by 2017, see Form CO, Table 6.27.
[78]  Except for its share of gas trades made at the Italian gas trading hub –  which  is  still  limited  to  [20-30]%  and  which  hub  is  not
exclusively dependent on regasified LNG as a source of (flexible) gas supply.
[79]  Replies to Questionnaire 1 – Customers, question 25; Replies to Questionnaire 2 – Competitors, question 27.
[80]  Replies to Questionnaire 1 – Customers, questions 39 and 40; Replies to Questionnaire 2 – Competitors, questions 39 and 40.
[81]  Shell holds a [50-60]% stake in the SEAL Bacton terminal pursuant to which it holds a veto right over decision-making there.

[82]  BG Group holds a [10-20]% interest in the Elgin Franklin gas field.

[83]  Notifying Party's response to the Commission's request for information of 30 July 2015.
[84]  […].
[85]  The SEAL pipeline is operated on a divided rights basis as between the Elgin Franklin owners ([50-60]%) and  the  Shearwater  owners  ([40-
50]%).
[86]  Form CO, Table 6.51.
[87]  Shell holds a [50-60]% stake in the SEGAL system (which encompasses, inter alia, the FLAGS pipeline and the SEGAL St Fergus gas  processing
terminal), pursuant to which it has a technical right of veto over the use of capacity.

[88]  BG Group holds a [40-50]% stake in the Knarr field.

[89]  Form CO, Tables 6.54 and 6.55 as well as Annex 15.

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 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

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