The Commerce Commission of New Zealand, voicing concern that onecompany would control the country’s natural gas markets, onThursday rejected the takeover by Royal Dutch/Shell Group andApache Corp. of Fletcher Challenge Energy, the country’s largestenergy exploration company. For the moment anyway, a rejected bidwould end Houston-based Apache’s attempt to increase its Canadianholdings.

Shell, which has been in charge of the transaction from thebeginning, was expected to appeal the decision as early as today.

Although the financial transaction was officially closed earlierthis week by Fletcher, Shell and Apache (see Daily GPI, Oct. 12), New Zealand Commission Chair JohnBelgrave said his department was not satisfied that Shell would not”acquire or strengthen its dominance in the gas production andliquefied petroleum gas production markets” — basically monopolizingthe country’s energy markets.

The sell off of Fletcher Challenge Group’s energy unit issubject to approval by the country’s commerce commission. Eventhough the commission said nothing —nor would it have anyreason – about Fletcher’s divestiture of its Canadian assets,without Shell’s participation, the Apache deal will fall apart,too, said analysts.

In the takeover, Shell was basically going to keep or sell offall of Fletcher Energy’s international assets, and Houston-basedApache would take on Fletcher’s Argentina and Canada properties.For Apache, those properties would add 713 Bcfe of natural gas inproved reserves, or about 12% to its current proven reserve base.

Both Shell and Apache planned to comment until after appealingthe commission’s decision. However, a Shell spokeswoman said thecompany was “very disappointed” by the decision to reject thetakeover bid, and said company officials would be meeting with NewZealand officials “at the earliest opportunity to consider moreclosely our concerns regarding the proposal.”

Shell has indicated it is “hopeful” it still will be able tocomplete the transaction, and speculation mounted that the energygiant would alter its bid. Whether a changed bid would affectApache’s wanna-be properties was not known, but the controversyseemed to center on the New Zealand holdings only. In its currentbid, Shell was going to become the dominant oil and natural gasproducer onshore in New Zealand, also holding the largest prospectsin acreage.

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