PUBLIC VERSION OMV New Zealand Limited Application for Clearance of a Business Acquisition Under Section 66 of the Commerce Act 1986 Proposed Acquisition by OMV New Zealand Limited of Shares in Shell Exploration NZ Limited, Shell Taranaki Limited, Shell New Zealand (2011) Limited, and Energy Infrastructure Limited 15 June 2018 30750909_1.docx TABLE OF CONTENTS Part A: Executive Summary ................................................................................................. 5 The Parties .................................................................................................................. 5 The Transaction .......................................................................................................... 5 Affected Markets ......................................................................................................... 6 Counterfactual ............................................................................................................. 7 Industry Context .......................................................................................................... 8 No Substantial Lessening of Competition in the Natural Gas Market ........................ 8 No Substantial Lessening of Competition in the LPG Market .................................. 11 No Substantial Lessening of Competition in Markets for Other Assets ................... 12 Conclusion ................................................................................................................ 13 Part B: The Parties .............................................................................................................. 14 Acquiring Party .......................................................................................................... 14 Selling Party .............................................................................................................. 14 Part C: Transaction Details ................................................................................................ 16 Overview of Proposed Transaction ........................................................................... 16 Rationale for the Proposed Transaction ................................................................... 17 Transaction Documents ............................................................................................ 18 No Other Competition Agencies Being Notified ....................................................... 18 Separate Relevant Transactions .............................................................................. 18 Part D: Horizontal Overlap .................................................................................................. 19 Activities of the Parties to the Transaction ............................................................... 19 Relevant Overlaps Between the Parties ................................................................... 21 Required Documents/Information ............................................................................. 23 Part E: Market Definition ..................................................................................................... 24 Overview of Relevant Markets .................................................................................. 24 Product Dimension – Natural Gas, LPG and Oil/Condensate .................................. 24 Functional Levels ...................................................................................................... 24 Page 2 30750909_1.docx Geographic Dimension – Natural Gas and LPG ...................................................... 27 Geographic Dimension – Storage and Transportation by Pipeline .......................... 27 Time Dimension ........................................................................................................ 27 Miscellaneous Other Market Issues .......................................................................... 28 Conclusion on Relevant Market Definitions .............................................................. 30 Part F: Counterfactual ......................................................................................................... 31 Part G: The Industry ............................................................................................................ 32 Natural Gas & LPG Industry Overview ..................................................................... 32 Gas Industry .............................................................................................................. 32 LPG ........................................................................................................................... 52 Relevant Government Policy & Current Industry Trends ......................................... 55 Recent Merger Activity .............................................................................................. 56 Part H: Natural Gas Competition Assessment ................................................................. 58 Market Shares ........................................................................................................... 58 Constraint from Existing Competitors ...................................................................... 66 Constraints from Potential Competition .................................................................... 76 Countervailing Customer Power ............................................................................... 80 Conditions for Coordination Not Satisfied ................................................................. 83 Efficiencies ................................................................................................................ 83 Part I: LPG Competition Assessment .............................................................................. 84 Part J: Storage and Pipelines Competition Assessment ................................................ 85 Storage ...................................................................................................................... 85 Pipelines .................................................................................................................... 88 Part K: Confidentiality ......................................................................................................... 91 Part L: Declaration ............................................................................................................... 92 Appendices Appendix 1: Transaction Documents ........................................................................ 93 Appendix 2: Corporate Structure Charts ................................................................... 94 Page 3 30750909_1.docx Appendix 3: Each Party’s Most Recent Annual Report & Audited Financial Statements ................................................................................................................ 96 Appendix 4: Each Party’s Total Sales Revenues, Volumes, Capacity & Excess Capacity Figures ....................................................................................................... 97 Appendix 5: Names/Contact Details of Competitors & Industry Associations.......... 98 Appendix 6: Key Customer Details ......................................................................... 100 Appendix 7: Relevant Maps .................................................................................... 102 Appendix 8: Glossary of Terms ............................................................................... 105 Page 4 30750909_1.docx Part A: Executive Summary 1. OMV New Zealand Limited (OMV) is applying for clearance from the Commerce Commission to acquire 100% of the shares in Shell Exploration NZ Limited (SENZL), Energy Infrastructure Limited (EIL), Shell Taranaki Limited (Shell Taranaki), and Shell New Zealand (2011) Limited (Shell 2011) (together referred to as the Shell Companies). Shell Investments NZ Limited (SINZL) is currently the owner and vendor of all of the shares in the Shell Companies. The Parties 2. OMV is a New Zealand incorporated wholly owned subsidiary of OMV Aktiengesellschaft. OMV Aktiengesellschaft is an Austrian incorporated company engaged in producing and marketing oil, gas, and innovative energy and high-end petrochemical solutions. OMV Aktiengesellschaft is one of Austria's largest listed companies. 3. SINZL and the Shell Companies are wholly owned subsidiaries of Royal Dutch Shell plc. The latter is a multinational British-Dutch oil and gas company headquartered in the Netherlands and incorporated in the United Kingdom. It has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. It has secondary listings on Euronext Amsterdam and the New York Stock Exchange. The Transaction 4. Under the proposed share purchase transaction (the Proposed Transaction), OMV will acquire the following assets from Shell: 4.1 a 48% participating interest in the joint venture relating to the Pohokura gas field (Pohokura JV) held by SENZL; 4.2 an 83.75% participating interest in the joint venture relating to the Maui gas field (being the part of the Maui mining permit down to 12,000 feet subsea) (Maui JV) – that 83.75% participating interest is held by Energy Petroleum Holdings Limited (EPHL) as to 18.75%, Energy Petroleum Taranaki Limited (EPTL) as to 38.75%, Taranaki Offshore Petroleum Company of New Zealand (TOPCO) as to 6.25%, and Energy Petroleum Investments Limited (EPIL) as to 20%. EPHL, EPTL and TOPCO are wholly owned subsidiaries of SENZL and EPIL