Arrow delivers monster gas deal

The QCLNG plant of Curtis Island.

The QCLNG plant of Curtis Island.

Arrow Energy has agreed one of the largest gas supply deals on Australia’s east coast, to bring to market its significant gas reserves in southern Queensland.

Under the 27-year deal, uncontracted gas from Arrow’s Surat Basin fields in Queensland would flow to the QCLNG Project on Curtis Island, which will then sell the gas to local customers as well as exporting it.

Arrow Energy CEO Qian Mingyang said the company’s equal shareholders, PetroChina and Shell, had approved Arrow’s execution of a binding Gas Sales Agreement following 18 months of detailed 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,” said Mr Qian.

“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 phased development activity would commence from the expansion of Arrow’s Tipton fields, near Dalby, and build to new development areas from around 2021.

The current Queensland total gas supply is 1,450 PJ/a (4,000 TJ/d), of which Queensland residential and industrial demand is approximately 178 PJ/a.

“Collaboration will accelerate first gas production to approximately 2020, bringing an additional 240 PJ/a or 655 TJ/d of gas to the Queensland market at peak production,” said Mr Qian.

Shell Australia Chair Zoe Yujnovich said QCLNG had existing pipelines, processing plants and had developed ways of supplying gas to both local and international customers - while Arrow had developed the expertise needed to extract gas from its fields in the Surat Basin.

“Onshore gas developed in Queensland has none of the oil produced by traditional gas fields, and is expensive to develop – so without the scale of LNG development it would simply stay in the ground,” said Ms Yujnovich.

“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 can provide.

“The path forward for Arrow that is made possible by [the] announcement would see the venture sell its gas to QCLNG upstream of the 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.”

Federal Minster for Resources and Northern Australia Matt Canavan welcomed the agreement, saying more gas supply is being made available to domestic consumers.

“Not only will this agreement give domestic consumers more certainty in their gas supply, it will bring around 1,000 new jobs for Queensland,” said Mr Canavan.

Arrow Energy is a 50:50 joint venture between Shell and PetroChina.

The QCLNG Project involves a 340 km, 1,066.8 mm export pipeline from Wandoan in the Surat Basin to north-east of Gladstone, as well as the two-train LNG processing plant and export terminal.

Joint venture interests in Train 1 are Shell (50 per cent) and CNOOC (50 per cent), with Train 2 participating interests being Shell (97.50 per cent) and Tokyo Gas (2.5 per cent).

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