BP PLC suffered a setback to its post-Deepwater Horizon recovery plans Thursday after the Australian government said it would block a $1 billion deal that would have made it the country's dominant consumer-fuel retailer.
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The Australian Competition and Consumer Commission said Thursday the 1.79 billion Australian dollar (US$1.37 billion) deal to buy a network of gas stations from Woolworths Ltd. would significantly reduce competition in the country's retail fuel supply. BP's proposal to sell some of the sites wouldn't address these concerns, the watchdog said.
The decision is a blow to BP, which has been working to rebuild in the wake of its disastrous 2010 Gulf of Mexico oil spill and a dramatic crash in oil prices. The British company is increasing its production, with seven new projects starting in 2017, and expanding its retail footprint in select markets.
The deal with Woolworths was struck in 2016 and would have added about 530 gas stations to BP's Australian portfolio, plus more than a dozen development sites. BP hoped to repeat the success it has enjoyed in other markets, coupling fuel supply with rewards schemes and shops that offer fresh food and coffee, by joining with Woolworths--the operator of Australia's largest supermarket chain.
Woolworths was aiming to use the proceeds to bolster its balance sheet and reinvest in its core operations.
The Australian consumer watchdog said the deal would reduce competition and lead to higher fuel prices across the country. BP already supplies fuel to about 1,400 BP-branded service stations in Australia, setting fuel prices at roughly 350 of them.
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BP and Woolworths said they were disappointed by the decision and would consider their next steps.
The deal reached late last year came at the start of a mini renaissance in the retail-fuel sector. Buffeted by low oil prices, big energy companies are focusing more on their refining and retail offerings, looking at opportunities in strategic markets like Mexico and India.
Next year is expected to see a flurry of companies in Europe and the Middle East float their retail businesses.
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(END) Dow Jones Newswires
December 14, 2017 08:14 ET (13:14 GMT)