Arrow Energy has announced a 27-year sales agreement with one of Australia’s leading natural gas producers, to bring more gas to Queensland.

The agreement, which is a joint venture with Shell-owned QCLNG, includes the use of QGC-operated existing gas pipeline and related infrastructure.

The agreement will also allow Arrow Energy to commercialise the majority of its gas reserves in the Surat Basin to supply both domestic and liquefied natural gas (LNG) export customers, and will help reduce the tight supply-demand balance in the southern and eastern gas market.

In September 2017, the ACCC Gas Inquiry found the East Coast gas market is becoming increasingly reliant on supply from Queensland.

Arrow Energy CEO, Qian Mingyang, said the company’s equal shareholders, PetroChina and Shell, had approved Arrow’s execution of a binding Gas Sales Agreement (GSA) following 18 months of detailed work on upstream collaboration agreements.

“The deal offers long-awaited infrastructure collaboration in the natural gas industry, creating better cost efficiencies and enabling us to bring this gas to market in a challenging investment climate,” Mr Qian said.

“Collaboration between the parties will see use of existing QGC-operated infrastructure such as gas compression, processing and transmission infrastructure as well as water transport and treatment facilities. Utilising existing upstream infrastructure will reduce impacts to landholders and to communities.”

Mr Qian said phased development activity would commence from the expansion of Arrow’s Tipton fields, near Dalby, and build to new development areas from around 2021.

The current QLD total gas supply is ~1,450PJ/yr (4,000TJ/d), of which QLD residential and industrial demand is approximately 178PJ/yr.

“Collaboration will accelerate first gas production to approximately 2020, bringing an additional 240 petajoules per year (PJ/yr) or 655 terajoules per day (TJ/d) of gas to the QLD market at peak production,” Mr Qian said.

This increase equates to approximately 10 per cent of the southern and eastern gas markets’ annual production.

QLD Minister for Mines, Dr Anthony Lynham, said it was an important announcement as  reliable, accessible gas supply in Qld is critical as an energy and feedstock supply to industry.

“It’s QLD gas that has been helping put downward pressure on electricity prices for Australian homes and businesses.

“The Government will be interested in the company’s proposals for domestic gas supply and their production timeline.

“It’s important for industry and jobs that more gas gets to market.”

Minister for Resources and Northern Australia, Matt Canavan, welcomed the agreement.

“While this agreement will make a material difference to supplies, the cost of transporting gas to the southern market is significant and is not a sustainable long-term solution for businesses and households in Victoria and New South Wales,” Mr Canavan said.

The Australian Petroleum Production and Exploration Association (APPEA) also welcomed the announcement of the joint gas supply deal that will underwrite the development of Arrow’s massive Surat Basin reserves, estimated to be five trillion cubic feet (TCF).

APPEA CEO, Dr Malcolm Roberts said it was great news for QLD and Australia.

“The largest undeveloped gas reserve on the east coast has found a way to market, supplying Australia’s domestic and export customers for decades to come.

“This innovative deal has only been possible by the use of existing infrastructure developed to support the LNG industry.

“Once again, we are seeing how the development of a world-class gas export industry in Queensland is actually boosting supply to the domestic market.

“There is no doubt that a concerted effort to reduce regulatory costs will encourage more exploration and development. This must be a priority for all governments.”

The gas is expected to come from Arrow’s existing production licences and authorities to prospect in the Surat.

Where proposed production is covered by ATPs, Arrow will need to obtain production licences.

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