In its statement of issues released this morning, the ACCC said it was hoping to seek industry views and more information on the competition issues that have arisen.
"The ACCC is concerned that, by aligning Shell's interest in Arrow Energy with BG's LNG facilities in Queensland, the proposed acquisition may change Shell's incentives such that it will prioritise supply to BG's LNG facilities over competing gas users," ACCC chairman Rod Sims said.
As a result, Shell could choose to direct more, or even all, of the Arrow JV's massive CSG reserves towards meeting BG's contracts to supply LNG export markets. This would remove some or all of Arrow's gas from the domestic market.
"Currently, Arrow has the largest quantity of uncommitted gas reserves in eastern Australia and there are a limited number of other potential suppliers to the domestic market," Sims said.
"If the proposed acquisition resulted in less supply of gas to the domestic market, therefore, this could substantially lessen competition to supply domestic gas users and lead to higher domestic prices and more restrictive contractual terms."
Most of Arrow's domestic supply contracts are contracts that Arrow entered into prior to Shell and PetroChina's acquisition of Arrow in 2010.
Since this acquisition, Arrow has entered into few new contracts for the wholesale supply of gas.
Arrow's gas in the Surat Basin could be placed in BG's existing high pressure pipeline, while the Bowen Basin reserves would need a new pipeline developed, one that could take Blue Energy's stranded gas as well.
BG has domestic gas contracts with power stations, industrial users and gas retailers and supplies about 20% of Queensland's gas demand, however the ACCC found its mauin focus is on LNG and that its more recent domgas contracts have been short-term, using ramp gas from its LNG plants.
However, the ACCC found that the proposed acquisition would be unlikely to increase the ability Shell to foreclose supply of gas to rival LNG plants, because the merged entity would only supply a small share of the global LNG market.
The ACCC has received a large number of submissions from market participants concerned about the competition effects of the proposed acquisition, and it wants to hear more, with submissions open until October 8.
The ACCC has announced its final decision will be delayed until November 12.
Last week shell secured approval for the merger from the European Union.
The EU's antitrust regulators said the deal did not raise concerns about market competition because it "would not lead to Shell benefiting from market power in a number of markets, namely oil and gas exploration, the liquefaction of gas and the wholesale supply of LNG".
The EU found the takeover wouldn't permit Shell to affect costs and that European gas markets would stay aggressive after the transaction.
Shell CEO Ben van Beurden said the EU approval indicated that Shell was making good progress on the deal.
"The recommended combination with BG is a springboard to change Shell into a simpler and more profitable company, making Shell more resilient in a world where oil prices could remain low for some time," he said.
The approval in Europe comes with an undertaking that the company will not be able to prevent competitors from using its gas infrastructure in the North Sea.
Van Beurden hopes to close the merger in the new year, but first he will need to secure the sign-off from Chinese and Australian regulators.
Shell got the green signal for the merger from Brazil and the US in June.
Australian approval could be problematic, because the ACCC is a few months into its East Coast Gas Inquiry, which is due to be delivered in April.
