MELBOURNE, May 11 (Reuters) - Australian explosives makerIncitec Pivot Ltd raised concern on Monday that RoyalDutch Shell's takeover of BG Group will increaseconsolidation among gas producers just when manufacturers wantmore competition among suppliers.
At the same time, Incitec Chief Executive James Fazzino saidif the $70 billion deal went ahead, it could result in speedierdevelopment of Shell's Arrow Energy gas projects in Australia.
His comments were the first by a big manufacturer on theissues that might be raised when the Australian Competition andConsumer Commission considers the $70 billion takeover. Shellhas yet to submit its application for approval of the deal.
"The broad concern here is the industry doesn't need moreconsolidation," Fazzino told reporters.
Large Australian manufacturers fear gas industryconsolidation will limit their choice of suppliers and bringhigher prices.
Fazzino said Incitec would talk to Shell and the competitionwatchdog, when asked whether Incitec would oppose the deal.
"Maybe it means the Arrow acreage gets developed quicker, aswell as the BG acreage. That would be a very positive outcome,"he said on a conference call after delivering a 27 percent risein first-half profit.
The Arrow acreage is the highest quality undeveloped gas inthe state of Queensland, which is short of gas, he said.
Incitec has led manufacturers campaigning for morecompetition among gas suppliers in Australia, where the bigproducers, including Shell and BG, are focused on exporting gasfrom new liquefied natural gas plants.
Gas supply concerns led Incitec to abandon plans to build anammonia plant in Australia in 2013 and instead build it inLouisiana, taking advantage of cheap U.S. gas and a quickerapproval process.
Thanks to U.S. shale gas producers drilling moreefficiently, gas futures prices are now below $4 per millionBritish thermal units, compared with Incitec's assumption thatgas would cost $5.50 per mmBtu when it signed off on the plant.
"The economics of Louisiana look better today than when weapproved the project," Fazzino said.
Incitec reported a net profit of A$146.4 million ($115.4million) for the half year to March, helped by cost cuts and aweaker Australian dollar.
Operating earnings of A$215.6 million, up 12 percent, were weaker than expected as drought in northern Australia's cottongrowing region hit Incitec's fertiliser arm. Weak demand fromIndonesia's coal miners also hurt the explosives business.
Incitec shares, which have sharply outperformed the broadermarket so far this year, fell as much as 6.4 percent to athree-month low after the results were announced. ($1 = 1.2684 Australian dollars) (Reporting by Sonali Paul; Editing by Tom Hogue)
