Arrow Energy, a coal seam gas (CSG) joint venture (JV) between Shell and PetroChina, has announced the development of Phase 2 of its Surat Gas Project (SGP) in Queensland, Australia.
The expansion will occur to the north-east of Miles, within the Western Downs region of the Surat Basin. First gas from Phase 2 is anticipated to be drawn in 2026.
Phase 2, known as SGP North, is set to significantly increase gas production, adding more than 130 terajoules of gas per day to the market. This new phase is part of a broader expansion plan for the Surat Gas Project, which aims to produce over 4,000 petajoules of gas throughout the project’s lifespan.
The additional gas will be directed to the QCLNG liquefied natural gas (LNG) facility on Curtis Island, near Gladstone. This facility, operated by Shell, will help fulfil long-term contracts and domestic supply agreements.
The expansion is a continuation of a 27-year gas sales agreement between Arrow Energy and QGC. At peak production, Phase 2 is expected to deliver approximately 22,400 barrels of oil equivalent per day, which equates to 130 million standard cubic feet per day.
QCLNG is a JV operated by Shell (73.75%), CNOOC (25%), and MidOcean Energy (1.25%). It supplied 15% of the east coast’s gas demand in 2023.
Phase 2 will involve processing the new gas volumes through the QCLNG infrastructure, including the construction of up to 450 production wells, a field compression station, 27km of new pipeline, and upgrades to existing road and infrastructure.
The commencement of construction for SGP North is planned for later this year. The project’s development is expected to create up to 400 jobs.
Arrow Energy CEO Zhengxin Peng said: “At a time when more gas is needed for homes, businesses and industries, the SGP North development will solidify Arrow’s position as a major producer of natural gas on the east coast.
“Natural gas is an important part of the energy transition, and the expansion demonstrates the faith our shareholders have in our ability to manage and deliver large-scale projects.”
The development will be carried out in two phases and will feature a new field compression station with a capacity of 121 terajoules per day. It will also have a 27km medium-pressure pipeline linking to QGC’s Bellevue central processing plant, and additional infrastructure upgrades.
Shell and PetroChina established Arrow Energy in 2010. In 2017, Arrow Energy signed a 27-year agreement to supply gas to the QCLNG joint venture.
The first phase of the Surat Gas Project, which was approved in April 2020, included the drilling of over 600 wells. The wells extract natural gas from coal seams within the Surat Basin.
The investment in Phase 2 is anticipated to yield an internal rate of return exceeding Shell’s hurdle rate for its integrated gas business. Shell has outlined plans to increase its LNG business by 20-30% by 2030 compared to 2022 levels and to boost LNG liquefaction volumes by 25-30% relative to 2022, as detailed in its Capital Markets Day in 2023.
