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The ACCC said the proposed acquisition would only lead to a "small horizontal aggregation" and there would continue to be a number of alternative sources of gas for domestic use in Australia.
In July after much speculation, Santos announced it would acquire ESG in an all-share deal valued at about $924 million.
Santos would then sell a 20% interest in ESG's coal seam gas permits to electricity supplier TRUenergy.
The watchdog said that while TRUenergy was involved in related downstream retail markets, the company's upstream interests after the acquisition would remain insignificant.
