Arrow deal boosts slumping Australian status


A supply deal between Shell Australia cum PetroChina-owned Arrow Energy to supply gas from the Surat Basin to the QCLNG LNG export facility at Gladstone, in Queensland, has been hailed as a manna from heaven fillip for famished east coast energy markets.

The 27-year sales agreement – tapping into reserves estimated at five trillion cubic feet in the Surat Basin – represents enough supply to annually deliver more than four times the shortfall forecast for the Queensland Curtis Liquefied Natural Gas project, which is a joint venture between Shell, CNOOC and Tokyo Gas.

The agreement, supplying an extra 240 petajoules a year and 6500 petajoules over the life of the project – will begin first production in 2021. It has also created an artery for Arrow to develop its Surat Basin project with 18 months of upstream collaborative work pre-empting first gas supplies.

The deal received state and federal government support in 2013, but stuttered as a result of high costs and low gas prices. Subsequently, however, a looming gas supply crisis in the eastern states of Australia, exacerbated by onshore drilling bans in New South Wales and Victoria and the three Gladstone LNG plants shipping first export cargoes, improved the economics significantly.

The Australian Petroleum Production & Exploration Association (APPEA) welcomed the gas supply deal, with the peak body’s Chief Executive, Dr Malcolm Roberts, saying: “This is great news for Queensland and for 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.”

Dr Roberts said the creation of 1000 news jobs, including 200 ongoing operational roles, was especially good news for regional communities in the Surat.

“While today’s announcement has been driven by industry, there is plenty governments can do to increase gas supply and put downward pressure on prices,” Dr Roberts added.
“The Queensland Government’s own analysis shows regulatory costs account for more than a third of exploration costs and almost one-tenth of all costs over a project’s life.

“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 deal came just days after Victoria, New South Wales and the Northern Territory were shamed by the Fraser Institute annual survey for being among the world’s most unattractive destinations for oil and gas investment.

The Northern Territory imposed a moratorium in 2016 that saw its ranking plummet from being the second-most attractive jurisdiction in Australia two years ago to the second worst today. The bad news for Australia was offset by South Australia moving back into the top 10 as an attractive investment destination.

The three badly ranked Australian states joined the dubious ranks with the likes of Venezuela and Libya among the 15th worst oil and gas investment destinations on the planet.
“Regulatory cost, duplication and policy uncertainty across most Australian jurisdictions are a strong deterrent to investors risking capital on new projects,” said Dr Roberts.

“The results show that even if NSW, the NT and Victoria lift their restrictions on gas extraction they will have work to do to regain investors’ trust.

“Queensland also has work to do after sliding down the rankings for the second consecutive year because of regulatory uncertainty, compliance costs and labour regulations.
“We encourage the new Queensland Government to reverse this worrying trend.

“All governments can buck these alarming trends by providing strong leadership and sensible regulatory oversight to create jobs, boost the economy and secure energy supply.”


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