Two of Royal Dutch Shell plc’s (RDS.A - Free Report) Australia focused joint-ventures have recently entered into an agreement to address the energy crisis in that country. Arrow Energy, which is jointly owned by Shell and PetroChina Company Limited (PTR - Free Report) , inked a supply deal pertaining to a Shell-operated Queensland Curtis Liquefied Natural Gas (“QCLNG”) project.
Arrow Energy will facilitate to unlock the gas reserves’ in the Surat Basin which is likely to ease pressure in the tight gas market of Australia.
Surat Basin gas is one of the largest underdeveloped resources in Australia. However, the project could not come online despite the federal grants due to the industry downturn. With the market coming out of the slump, demand for gas has soared for power plants in Australia.
Per the 27-year supply agreement, Arrow Energy will supply around five trillion cubic feet of gas to the $20-billion QCLNG project which is jointly owned by Shell, China’s CNOOC Limited (CEO - Free Report) and Tokyo Gas Co., Ltd.
The agreement with QCLNG will help to accelerate the large-scale gas production at Arrow leading to additional 240 petajoules a year or 655 terajoules a day of gas to the Queensland market at peak production. Along with unlocking huge gas reserves on the east coast and boosting the domestic gas supply, the deal will also create around 1000 new jobs. QCLNG’s existing connections with the market will help Arrow Energy to achieve cost efficiency. The move will make the project feasible in the challenging market environment. Arrow Energy will also take a call in 2018 regarding the expansion of Surat Basin Project.
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Headquartered in Netherlands, Shell is one of the largest integrated energy companies engaged in production, refining, distribution and marketing of oil and natural gas. The company currently carries a Zacks Rank #3 (Hold).