This is potentially good news:
Shell has finally paved the way for a multi-billion dollar development of its large Arrow coal seam gas resource in Queensland, inking a 27-year deal for the sale of the gas to its majority-owned QCLNG venture.
The deal, one of the largest gas supply contracts on the east coast, involves two separate Shell ventures with different Chinese partners. PetroChina is a 50 per cent owner of Arrow, while fellow Chinese oil giant CNOOC has a stake in QCLNG, which supplies gas to the domestic and export markets.
The sale contract involving about 5 trillion cubic feet of gas will allow for the staged development of the Arrow coal seam gas resource, with the initial phase expected to get under way next year.
As the owner of the largest chunk of undeveloped gas in the tight east coast market, Arrow has been under pressure to find a commercial project to bring the gas to market. But Shell has always pointed out that an LNG-scale market opportunity was essential to justify the huge cost of getting the gas out of the ground.
…The development will bring an additional 240 petajoules a year, or 655 terajoules a day, of gas to the Queensland market, Mr Qian said. That compares with current Queensland gas supply of about 1450 petajoules a year.
That is the entire projected east coast gas per annum shortfall filled in one project. The question is, at what price. The resource should never have ended up with Shell. The ACCC gave it away just 2 years ago when Shell bought British Gas. It should have been force divested.
It’s now in hands of the cartel so I do not expect the pricing to be generous.
