Shell and PetroChina sign 27-year supply deal for Australian gas project

Royal Dutch Shell and PetroChina have passed a significant milestone on the way to advancing a long-awaited gas development in Australia, signing a 27-year supply deal for the project.

The agreement between Arrow Energy, a joint venture between the two oil majors, and Shell’s Queensland Curtis Liquefied Natural Gas (QCLNG) will bring about 5 trillion cubic feet (tcf) of gas to the market.

The gas reserves are being extracted from Arrow’s Surat Basin, one of largest undeveloped gas resources in Eastern Australia, but the project has been blighted by setbacks since getting state and federal approvals in 2013, mainly due to high costs and weak gas prices.

However, economics have improved in recent years with local prices rising following the arrival of three LNG plants in Queensland, which has coincided with an increased demand for gas in Australia.

“Collaboration will accelerate first gas production to approximately 2020, bringing an additional 240 petajoules per year of gas to the Queensland market at peak production,” said Arrow Energy CEO Qian Mingyang.

“QCLNG’s existing connection points with the gas market would enable Arrow to reduce development cost, making projects investable despite challenging market conditions,” added Shell’s Australia Chairman Zoe Yujnovich.