Shell Pushes Forward With $6.4 Billion Gas Project Despite COVID-Crisis

Shell has announced the final investment decision on the $6.4-billion Surat Gas Project in Queensland, Australia, the company said in a press release.

The project will produce some 90 billion cu ft of natural gas at peak production levels, Shell said, that will be sold both domestically and on export markets.

The Surat Gas Project is a partnership between Shell and Arrow, Energy, a 50/50 joint venture between the Anglo-Dutch supermajor and PetroChina.

The news, while it comes at a time of depressed gas prices, is good for Queensland: Australia's southeast is facing gas shortages in just a few years. The ironic situation is the result of two oversights, the first of which was that most of the LNG production capacity that came on stream in the last few years was directed abroad.

As the International Energy Agency said in 2018, "Increasing LNG exports have created a tight supply in Australia's eastern market, which is characterized by weak regulation, poor transparency and low liquidity. Market inefficiencies need to be addressed swiftly and transparency improved rapidly for domestic consumption and LNG exports to successfully coexist."

Queensland is particularly vulnerable: the state is a major LNG producer, but the resources are running out, and according to one local consultancy, it would be forced to shut down 33 percent of its LNG production capacity because of resource depletion by 2025.

According to Shell, its Arrow Energy venture already produces 140 million cu ft daily, which is sufficient to meet some 40 percent of Queensland's natural gas demand, equal to a tenth of total gas demand on the country's east coast.

The Arrow Energy venture was approved by the Queensland authorities in February last year, likely with a sigh of relief. The project will tap an estimated 3 trillion cu ft of natural gas in the Surat Basin.

By Irina Slav for Oilprice.com

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