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A$10bn Surat gas project gets green light

17th April 2020

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – Energy major Shell has taken a final investment decision to develop the first phase of integrated coal seam gas (CSG) company Arrow Energy’s A$10-billion Surat gas project, in Queensland.

The company said on Friday that the decision would bring up to 90-billion cubic feet per year of new gas to market at peak production, which will flow to Shell-operated Queensland Curtis gas (QCG) project, to be sold locally and exported through its plant on Curtis Island.

The utilisation of QCG’s existing upstream pipelines and treatment facilities enables Arrow to significantly reduce development costs, making the project competitive and economically attractive,” said Shell integrated gas and new energies director Maarten Wetselaar.

“The Arrow joint venture (JV) 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.”

“QCG has reached strong and stable production since its startup in December 2015, and Arrow has the strong technical capability to develop the Surat Basin fields innovatively and efficiently,” said Shell Australia chairperson Tony Nunan. 

“QCG supplied 16% 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.”

Arrow CEO Cecile Wake said that the decision by PetroChina, Shell and Arrow to develop the Surat project demonstrated 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 QCG JV.

“This agreement enables the use of capacity in QCG’s existing gas and water processing, treatment and transportation infrastructure, reducing the impacts on landholders, communities and the environment and ensuring that more gas can be economically developed.”

Wake said Arrow would this year commence construction of more than 600 Phase 1 wells and is on track to deliver first gas from the project in 2021. Over the full 27-year life of the Surat gas project, Arrow expects to develop around five-trillion cubic feet of natural gas.

“An initial 200 construction jobs will be created during Phase 1, with an anticipated further 800 construction and operating roles over the life of the Surat gas project,” Wake said.

Queensland Premier Annastacia Palaszczuk has welcomed the final investment decision, saying the investment would mark another milestone in Queensland’s economic recovery from Covid-19.

Federal Resources Minister Keith Pitt has also welcomed the announcement, saying it was a vote of confidence in Australia’s gas industry and the energy policy settings that have been established by the government.

“It is a welcome shot in the arm for regional businesses especially in the Western Downs region of Queensland.

“Importantly, it will deliver up to 270 terrajoules of gas a day, or around 100 petajoules a year, for both the domestic market and for export with construction to begin this year and the first gas being delivered next year,” Pitt said.

Edited by Creamer Media Reporter

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