MELBOURNE (Reuters) - Australian explosives maker Incitec Pivot Ltd (AX:IPL) raised concern on Monday that Royal Dutch Shell's (L:RDSa) takeover of BG Group (L:BG) will increase consolidation among gas producers just when manufacturers want more competition among suppliers.
At the same time, Incitec Chief Executive James Fazzino said if the $70 billion (45 billion pound) deal went ahead, it could result in speedier development of Shell's Arrow Energy gas projects in Australia.
His comments were the first by a big manufacturer on the issues that might be raised when the Australian Competition and Consumer Commission considers the $70 billion takeover. Shell has yet to submit its application for approval of the deal.
"The broad concern here is the industry doesn't need more consolidation," Fazzino told reporters.
Large Australian manufacturers fear gas industry consolidation will limit their choice of suppliers and bring higher prices.
Fazzino said Incitec would talk to Shell and the competition watchdog, when asked whether Incitec would oppose the deal.
"Maybe it means the Arrow acreage gets developed quicker, as well as the BG acreage. That would be a very positive outcome," he said on a conference call after delivering a 27 percent rise in first-half profit.
The Arrow acreage is the highest quality undeveloped gas in the state of Queensland, which is short of gas, he said.
Incitec has led manufacturers campaigning for more competition among gas suppliers in Australia, where the big producers, including Shell and BG, are focussed on exporting gas from new liquefied natural gas plants.
Gas supply concerns led Incitec to abandon plans to build an ammonia plant in Australia in 2013 and instead build it in Louisiana, taking advantage of cheap U.S. gas and a quicker approval process.
Thanks to U.S. shale gas producers drilling more efficiently, gas futures prices are now below $4 per million British thermal units, compared with Incitec's assumption that gas would cost $5.50 per mmBtu when it signed off on the plant.
"The economics of Louisiana look better today than when we approved the project," Fazzino said.
Incitec reported a net profit of A$146.4 million ($115.4 million) for the half year to March, helped by cost cuts and a weaker Australian dollar.
Operating earnings of A$215.6 million, up 12 percent, were weaker than expected as drought in northern Australia's cotton growing region hit Incitec's fertiliser arm. Weak demand from Indonesia's coal miners also hurt the explosives business.
Incitec shares, which have sharply outperformed the broader market so far this year, fell as much as 6.4 percent to a three-month low after the results were announced.