Shell and PetroChina invest in Australian gas project

21 April 2020

Australian integrated coal seam gas (CSG) company, Arrow Energy, announced on April 17 that it had sanctioned the first phase of its Surat Gas Project (SGP) in southern Queensland, with construction set to begin this year. Arrow is owned 50/50 by Shell and PetroChina, a subsidiary of China National Petroleum Corporation (CNOOC).

Representative image: Maximov Denis/Shutterstock

Arrow’s announcement came after Shell and PetroChina announced final investment decisions (FID) on phase one of the project which will bring up to 90 billion cubic feet per year of new gas to market at peak production. The gas will flow to QGC, a Shell-operated joint venture between Shell, CNOOC, and Tokyo Gas, to be sold locally and exported through its plant on Curtis Island.

Arrow CEO Cecile Wake said: “Today’s decisions by PetroChina, Shell and Arrow demonstrate commitment to and confidence in Queensland and the Australian market at a time of global economic turmoil from COVID-19 and against the backdrop of sustained low oil prices. This significant investment comes at a critical time and will cement Arrow’s position as a major producer of natural gas on the east coast.

“The Surat Gas Project is the first large-scale CSG project in Australia to be underpinned by a significant infrastructure collaboration and gas sales agreement, together with a suite of supporting agreements, which have been put in place between Arrow and the Shell-operated QGC joint venture.”

Shell’s Integrated Gas and New Energies Director Maarten Wetselaar said: “The utilisation of QGC’s existing upstream pipelines and treatment facilities enables Arrow to significantly reduce development costs, making the project competitive and economically attractive. The Arrow joint venture partners’ decision not to build another two trains on Curtis Island provided the opportunity to create this alternative pathway to market for the resource. The approach we have taken to this investment is aligned with Shell’s focus on actively managing all operational and financial levers to deliver sustainable cash flow generation. It reflects our disciplined approach to capital spend, which takes a long-term view of the fundamentals of supply and demand.”

Construction of the project will commence in 2020, with first gas sales expected in 2021. Over the full 27-year life of the Surat Gas Project, Arrow expects to develop around 5 Trillion Cubic Feet of natural gas. Phase one will see the construction of more than 600 wells.

Arrow currently operates five gas fields in the Surat and Bowen basins in southern and central Queensland, respectively, and produces the equivalent of more than 40 per cent of Queensland’s total domestic gas demand.