Shell’s 50/50 joint venture (JV) with PetroChina—Arrow Energy—has greenlighted the Phase 2 expansion of its Surat Gas Project (SGP) in Queensland, Australia, with first gas expected in 2026.
Phase 2, known also as SGP North, will produce some 22,400 BOE/D (130 MMscf/D) of gas at peak, which will feed the Shell-operated Queensland Curtis LNG (QCLNG) facility on Curtis Island, near Gladstone, to support long-term contracts and domestic demand, Arrow reported in announcing the project’s sanctioning on 12 August.
Shell’s Integrated Gas and Upstream Director Zoë Yujnovich noted that QCLNG shipped its 1,000th cargo at the end of 2023, reaching a milestone that underscores the facility’s “significance as a gas supplier to Australia and the region.”
Now by embarking on Phase 2 of the Surat coal-seam project, Shell and PetroChina are proving their “commitment to bring more gas to market,” Yujnovich added.
Construction planned under Phase 2 includes
- Up to 450 new production wells and associated gathering systems.
- Road and telecommunication upgrades.
- A 121 TJ/d four-compressor field compression station.
- A 27-km medium-pressure pipeline connecting the new field compression station to Shell’s Queensland Gas Co. (QGC) Bellevue central processing plant.
- Low-pressure gas connection to QGC’s McNulty field compression station.
- Water and brine infrastructure expansion and upgrades.
Asia’s Energy Transition To Drive Major Global Growth in LNG Demand by 2040
Shell’s LNG Outlook 2024 estimates that global demand for LNG will rise by more than 50% by 2040, as industrial coal-to-gas switching gathers pace in Asia, causing these rapidly developing countries to use more LNG to support their economic growth.
“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,” Arrow CEO Zhengxin Peng said, noting that SGP North “will solidify Arrow’s position as a major producer of natural gas on the east coast” of Australia.
Shell and PetroChina formed the Arrow Energy JV in 2010 and in 2017 they announced a 27-year gas sales agreement to supply gas to the Shell-operated QCLNG, a JV between Shell (73.75%), China’s CNOOC (25%), and Washington DC-headquartered MidOcean Energy (1.25%).
Over the course of its 27-year sales agreement, Arrow Energy said it expects to drill some 2,500 gas wells in the Surat Basin while it simultaneously seeks to use its existing facilities and infrastructure to minimize the development’s overall environmental footprint.
Phase 1 of the Surat Gas Project was approved in April 2020 and included drilling more than 600 wells to grow Arrow’s operations between the existing Daandine and Tipton fields, two of the four fields it operates in the Surat Basin.
In 2023, QCLNG supplied 15% of demand on Australia’s east coast, according to Shell.
Beyond Australia, Shell plans to grow its global LNG business by 20 to 30% by 2030, compared with 2022, and LNG liquefaction volumes are planned to grow by 25 to 30%, relative to 2022, as outlined at the company’s Capital Markets Day in 2023.
