(The Sydney Morning Herald)– Arrow Energy has signed a 27-year deal to annually supply more than four times the forecast east coast domestic gas shortfall to Shell’s Queensland Curtis Liquefied Natural Gas (QCLNG) project.
The agreement, which begins first gas production in 2021, will provide an extra 240 petajoules a year of gas from Queensland’s Surat Basin, or close to 6500 petajoules over the life of the contract, to the state’s market.
Arrow and its joint owners, Shell and PetroChina, will now discuss the expansion of its Surat Basin project, with a final decision expected in 2018.
The deal creates a path for Arrow to develop its Surat Basin project without having to build its own LNG plant.
Arrow will provide the majority of its gas reserves to QCLNG, a joint venture between Shell, China National Offshore Oil Corp and Tokyo Gas, following close to 18 months of work on upstream collaboration agreements.
“The deal offers long-awaited infrastructure collaboration in the natural gas industry, creating better cost efficiencies and enabling us to bring this gas to market in a challenging investment climate,” Arrow Energy chief executive Qian Mingyang said.
“Collaboration between the parties will see use of existing QGC-operated infrastructure such as gas compression, processing and transmission infrastructure as well as water transport and treatment facilities. Utilising existing upstream infrastructure will reduce impacts to landholders and to communities,” Mr Qian said.
Arrow’s Surat Basin gas is among the biggest undeveloped resources in eastern Australia but the project has been stuck on the drawing board since getting state and federal approvals in 2013 due to high costs and weak gas prices.
The economics have improved over the past two years as local prices have soared following the start-up of three LNG plants in Queensland, including QCLNG. At the same time, demand for gas has jumped for power plants in eastern Australia.
Shell plans to sell gas from Arrow both domestically and on international markets, through Shell’s Curtis Island gas plant.
Shell chief executive Zoe Yujnovich said the new agreement opened doors for Arrow that would not be achievable if the company were part of the earlier LNG construction boom.
“The Arrow JV partners showed restraint earlier this decade by not building another two trains on Curtis Island, but that doesn’t change the need for scale that only LNG demand can provide,” Ms Yujnovich said.
“The path forward for Arrow that is made possible by today’s announcement would see the venture sell its gas to QCLNG upstream of existing pipelines and treatment facilities.
“QCLNG’s existing connection points with the gas market would enable Arrow to reduce development cost – making projects investible despite challenging market conditions.”
Source:: The Sydney Morning Herald