Arrow Energy, an incorporated joint venture between Shell (50%) and PetroChina (50%), has announced plans to develop Phase 2 of Arrow Energy’s Surat Gas Project in Queensland, Australia.

The gas from the project will flow to the Shell-operated QCLNG liquefied natural gas (LNG) facility on Curtis Island, near Gladstone, to meet long-term contracts and supply domestic customers. This is part of an existing 27-year gas sales agreement between Arrow Energy and QGC. Phase 2 is expected to contribute around 22,400 barrels of oil equivalent per day (or 130 million standard cubic feet per day) at peak production.

“Embarking on Phase 2 of the Surat Gas Project with Arrow is part of our commitment to bring more gas to market,” said Zoë Yujnovich, Shell’s Integrated Gas and Upstream Director. “QCLNG marked its 1000th cargo at the end of last year, reflecting its significance as a gas supplier for Australia and the region. This investment will enable us to sustain and grow this important, secure energy source that offers a lower emissions alternative to options like coal.”

During Capital Markets Day in 2023, Shell said it would secure further feedgas supply for its existing LNG facilities through additional backfill projects to increase value for shareholders. Phase 2 will deliver volumes to be processed through QCLNG infrastructure and comprise up to 450 production wells, a field compression station, 27 kilometres of new pipeline and road and infrastructure upgrades.

First gas is expected in 2026.

Key Facts

• Shell and PetroChina formed the Arrow Energy joint venture in 2010. Arrow announced a 27-year gas sales agreement to supply gas to the Shell-operated QCLNG joint venture in 2017. Phase 1 of the Surat Gas Project was approved in April 2020 and included more than 600 wells.
• QCLNG is a Shell-operated joint venture between Shell (73.75%), CNOOC (25%) and MidOcean Energy (1.25%) and supplied 15% of demand on Australia’s east coast in 2023.
• The production wells source natural gas from coal seams in the Surat Basin.
• The investment in Phase 2 is expected to generate an internal rate of return (IRR) in excess of the hurdle rate for Shell’s Integrated Gas business. Shell plans to grow its LNG business by 20-30% by 2030, compared with 2022, and LNG liquefaction volumes are planned to grow by 25-30%, relative to 2022, as outlined at Shell’s Capital Markets Day in 2023.
• According to Shell’s LNG Outlook 2024, global demand for LNG is estimated to rise by more than 50% by 2040, as industrial coal-to-gas switching gathers pace in Asia and these countries are expected to use more LNG to support their economic growth.

KeyFacts Energy: Arrow Energy Australia country profile