In a welcome boost for the industry, Arrow Energy has sanctioned commencement of the first phase of its Surat Gas Project (SGP) in southern Queensland, with construction set to begin this year.

Arrow’s sanction decision follows the final investment decision (FID) for phase one of the SGP from its shareholders, PetroChina and Shell.

Arrow CEO Cecile Wake said “The decisions by PetroChina, Shell and Arrow demonstrate commitment to and confidence in Queensland and the Australian market at a time of global economic turmoil from COVID-19 and against the backdrop of sustained low oil prices.

“This significant investment comes at a critical time and will cement Arrow’s position as a major producer of natural gas on the east coast,” Ms Wake said.

“The Surat Gas Project is the first large-scale CSG project in Australia to be underpinned by a significant infrastructure collaboration and gas sales agreement, together with a suite of supporting agreements, which have been put in place between Arrow and the Shell-operated QGC joint venture.

“This agreement enables the use of capacity in QGC’s existing gas and water processing, treatment and transportation infrastructure, reducing the impacts on landholders, communities and the environment and ensuring that more gas can be economically developed.”

Ms Wake said Arrow would this year commence construction of more than 600 phase one wells, and is on track to deliver first gas from the project in 2021. Over the full 27 year life of the Surat Gas Project, Arrow expects to develop around 5TCF of natural gas.

“An initial 200 construction jobs will be created during phase one, with an anticipated further 800 construction and operating roles over the life of the Surat Gas Project,” Ms Wake said.

“Arrow recognises the current uncertainty caused by COVID-19 and oil-price volatility, and will ensure that its development plans retain sufficient flexibility to manage these evolving challenges while bringing more gas to market.

“The decision to sanction phase one of the Surat Gas Project and commence construction this year is good for Queensland. It will mean more jobs, more opportunities for local companies and other economic benefits for regional Queensland, which has been home to Arrow for more than 20 years.”

Arrow currently operates five gas fields in the Surat and Bowen basins in southern and central Queensland, respectively, and produces the equivalent of more than 40 per cent of Queensland’s total domestic gas demand.

“This FID is the result of extensive collaboration between not just Arrow and the QGC joint venture, but also with landholders, communities and the State Government.

“In taking this investment decision, Arrow is enlivening those collaboration arrangements for the benefit of Arrow and its shareholders, the QGC joint venture and all Queenslanders,” Ms Wake said.

“Importantly there have been sustained efforts by Arrow, its landholders and local communities to jointly develop tailor-made ways of working on high quality black soil with minimised impacts, which will be the foundation of positive co-existence into the future.

“We sincerely appreciate the efforts of all involved, including the State Government, to bring Arrow to this point, and we look forward to safely and successfully delivering the first phase of this exciting project.

“In these challenging COVID-19 times, Arrow remains committed to operating its business and executing this project safely and responsibly to protect the health and well-being of its people and all of the regional communities where we operate,” she said.

“The utilisation of QGC’s existing upstream pipelines and treatment facilities enables Arrow to significantly reduce development costs, making Surat Gas Project competitive and economically attractive,” said Maarten Wetselaar, Integrated Gas and New Energies Director at Shell.

“The Arrow joint venture partners’ decision not to build another two trains on Curtis Island provided the opportunity to create this alternative pathway to market for the resource. The approach we have taken to this investment is aligned with Shell’s focus on actively managing all operational and financial levers to deliver sustainable cash flow generation. It reflects our disciplined approach to capital spend, which takes a long-term view of the fundamentals of supply and demand.

“QGC has reached strong and stable production since its start up in December 2015, and Arrow has the strong technical capability to develop the Surat Basin fields innovatively and efficiently,” said Shell Australia Chairman Tony Nunan.

“QGC supplied 16 percent of the demand in the Australian east coast domestic gas market in 2019 and celebrated its 500th LNG cargo. Gas from Arrow will provide more supply to both Australian domestic customers and export markets.”

Arrow, as the developer and operator of the Surat Gas Project, is currently seeking Expressions of Interest (EOI) for services to support operations and project activities related to the Surat Gas Project, including specialist road construction services and off-plot construction services.

Construction of the project will commence in later this year, with first gas sales expected in 2021.

Arrow at a glance

Arrow Energy is an integrated coal seam gas (CSG) company that explores and develops gas fields, produces and sells CSG and generates electricity.

The company has been safely and sustainably developing CSG since 2000 and supplying it commercially since 2004, currently producing the equivalent of more than 40 per cent of Queensland’s domestic gas demand from its five CSG fields in the Surat and Bowen basins.

Arrow is working to meet the growing demand for cleaner burning fuels.

Arrow is owned 50/50 by Shell and PetroChina (a subsidiary of China National Petroleum Corporation).

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