Royal Dutch Shell has entered the Australian electricity market with a $418m deal for ERM Power, an energy supplier for businesses.

The Anglo-Dutch company has ambitions to tilt its business towards gas and become a big competitor in the power market in the decades to come amid a global push towards cleaner fuels.

ERM is Australia’s second-largest energy retailer by load and provides electricity to commercial entities and industry. It also generates electricity from two gas-fired power plants in Oakey, Queensland, and Neerabup, Western Australia.

Zoe Yujnovich, Shell’s country chair, said the deal “aligns with Shell’s global ambition to expand our integrated power business and builds on Shell Energy Australia’s existing gas marketing and trading capability”.

Shell is already one of Australia’s biggest gas producers. It could supply ERM’s power stations with liquefied natural gas from its Queensland Curtis project, analysts have said.

While Shell has said it plans to increase its annual spending on power and cleaner energy businesses to $2bn-$3bn by 2025, its traditional oil and gas divisions will still dominate.

Shell wants to become the world’s largest electricity provider, and sees power as an outlet for its gas. But it has emphasised it would only expand heavily in this space if it could generate margins of 8-12 per cent.

Oil and gas majors are seeking to reinvent themselves in a world that is expected to make a big shift away from dirtier forms of energy in the coming decades.

Shell, like peers including France’s Total, has made acquisitions along the electricity supply chain, including First Utility in the UK. It has also bid for Dutch energy company Eneco. This year it began trading and selling electricity to businesses in Japan.

Nicholas Browne, at consultancy Wood Mackenzie, said ERM was a good fit for Shell.

“Firstly, it has a gas-only fleet, whereas most other Australian utilities own and operate coal-fired power. Secondly, it is relatively small scale so it will not raise any anti-competitive concerns compared to if Shell acquired a larger utility,” he added.

Shell said it expected the deal to close by the end of the year. It has received regulatory approval in Australia but the acquisition still is subject to agreement from ERM’s shareholders.

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