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Shell Makes FID on Surat Gas Project, Focuses on Down Under

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Royal Dutch Shell plc’s RDS.A Australia-focused joint-venture (JV) recently entered into a final investment decision (FID) to advance with the first phase of its Surat Gas Project in Queensland for addressing the energy crisis in that country. The JV Arrow Energy is co-owned by Shell and PetroChina Company Limited PTR.

The first phase of this $6.4-billion worth project, which was green-lighted by the Queensland government last February, is expected to produce as much as 90 billion cubic feet per year of new natural gas at the optimum level of production. The gas output will then be transported to the Shell-operated Queensland Curtis Liquefied Natural Gas (QCLNG) business, jointly owned by Shell, China’s CNOOC Limited CEO and Tokyo Gas Co., Ltd for its selling in both domestic and export markets. QCLNG’s existing connections with the market help Arrow Energy achieve cost efficiency.

At a time when the downward economic curve due to oil and gas price slump caused by the coronavirus already prompted energy giants to defer their investment decisions on projects, Shell’s major investment will inject substantial amount of cash into Australia’s A$2-trillion economy, which is likely to ease the tight gas market of the island nation. The Surat project start-up will also aid Australia to improve its gas production as its south-eastern region is expected to suffer gas scarcity in the near future.

Per the government head in the state of Queensland, the Surat Gas Project FID is the biggest gas undertaking the state has witnessed in the past nine years. The opening phase of this endeavour, probably starting by September, will create as much as 200 job positions.

Zacks Rank and Key Pick

Headquartered in the 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 #4 (Sell).

A better-ranked player in the energy space is New Fortress Energy LLC NFE, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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