Shell Australia (Shell) has taken a final investment decision to develop the first phase of Arrow Energy’s Surat Gas Project in Queensland, Australia.

This decision will bring up to 90 billion cubic feet per year of new gas to market at peak production, which will flow to Shell-operated QGC to be sold locally and exported through its plant on Curtis Island.

“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,” said Maarten Wetselaar, Integrated Gas and New Energies Director at Shell. “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.”

“QGC has reached strong and stable production since its start up in December 2015, and Arrow has the strong technical capability to develop the Surat Basin fields innovatively and efficiently,” said Shell Australia Chairman Tony Nunan. “QGC supplied 16 percent of the demand in the Australian east coast domestic gas market in 2019 and celebrated its 500th LNG cargo. Gas from Arrow will provide more supply to both Australian domestic customers and export markets.”

Construction of the project will commence in 2020, with first gas sales expected in 2021.

Background

• Arrow Energy is an incorporated joint venture between Shell (50%) and PetroChina (50%).
• QCLNG (QGC) is a Shell-operated joint venture between Shell (73.75%), CNOOC (25%) and Tokyo Gas (1.25%)
• In December 2017, Arrow announced it had agreed a 27-year Gas Sales Agreement (GSA) to underpin the Surat Gas Project and supply gas to the Shell-operated QGC joint venture. This agreement provides a path to market for up to 5 trillion cubic feet of Arrow’s Surat gas.
• Arrow currently produces 140 million standard cubic feet per day (MMSCF/day), which is enough to meet around 40% of Queensland domestic demand or around 10% of Australian east coast domestic demand.
• Shell’s QGC business supplied 16% of east coast gas demand in 2019.
• More than 2,500 new wells are to be developed across the life of the project.
• The project is expected to create up to 1,000 new jobs, including an initial 200 construction jobs during the first phase and a further 800 operational and construction roles over the life of the project.
• As operator, Arrow will construct and operate the Surat Gas Project, as well as operate its sizeable power generation interests, which have underpinned jobs in the Western Downs region for nearly two decades.
• Shell and PetroChina entered into the Arrow joint venture in 2010.