Shell assessing land for Qld LNG plant Steve RotherhamFriday, 13...

Shell assessing land for Qld LNG plant

Steve Rotherham
Friday, 13 February 2009

ROYAL Dutch Shell is planning to set up its own LNG plant in Gladstone, Queensland, upping the stakes in the takeover battle over Pure Energy that is being fought between Shell’s upstream gas partner, Arrow Energy, and BG Group.



Gladstone in Queensland.

Yesterday Shell announced the closing of its farm-in deal with Arrow Energy under which Shell acquired a 30% stake in Arrow’s coal seam gas acreage in Queensland.

But the company also said it had signed a key agreement with the Gladstone Port Corporation.

This deal gives Shell an exclusive right to investigate a site for a proposed LNG plant on Curtis Island where three other ventures currently have advanced plans for gas liquefaction facilities.

“Feasibility studies have commenced onsite and Shell is currently working on its initial advice statement for submission to the Queensland Department of Infrastructure and Planning,” the company said.

“A full integrated project plan is in the process of being formulated.”

The land could well be a site that was previously allocated to Toronto-listed LNG Impel, which announced plans for an LNG scheme in May last year and hasn’t been heard of since.

LNG Impel has signed no upstream gas supply partners and seems likely to be a non-starter.

Shell has said nothing about its preferred technology, but with the three other Curtis Island projects already selecting ConocoPhillips’ optimised cascade process, that system must be considered the front-runner.

Last week, Arrow’s chief executive for Australian operations, Shaun Scott, told a media briefing that optimised cascade was the liquefaction system best suited to CSG production ramp-ups as it allowed processing trains to start at as little as one-quarter of full capacity.

In its announcement, Shell said nothing of plans or estimates for the timetable, cost and size of the proposed plant, saying only that it aims to supply the facility with gas from CSG acreage jointly owned by it and Arrow Energy.

But Arrow is already planning to supply gas to Liquefied Natural Gas Limited’s 1.5 million tonnes per annum Fisherman’s Landing LNG scheme.

With Arrow having only 1180 petajoules (about 1.1 trillion cubic feet) of 2P (proven and probable) gas reserves, and much of that gas already committed to LNG Limited and to domestic gas and power supplies, Shell will need to find a lot more gas to underpin its planned project.

Each train will require at least 3 trillion cubic feet of 2P reserves to satisfy financiers.

Arrow is spending about $40 million per month in an aggressive reserves certification program, but the prospect of buying 2P reserves and advanced exploration projects through a takeover of Pure Energy must be very attractive.