Shell, PetroChina spat holds up Australia's biggest coal seam gas project: sources

[MELBOURNE] Royal Dutch Shell and PetroChina are at loggerheads over gas sales pricing at their Arrow Energy joint venture, holding up development of Australia's biggest coal seam gas resource, three industry sources said.

Shell and PetroChina acquired the Surat gas resource in a A$3.5 billion (S$3.4 billion) takeover of Arrow in 2010, and had expected to reach a final investment decision in 2018, with first production around 2020.

That was after the Arrow Energy venture signed a 27-year deal in December 2017 to supply natural gas from Surat to the Queensland Curtis LNG plant (QCLNG), which is operated by Shell.

PetroChina, though, is unhappy with the price in the sales agreement with QCLNG and the technical plan for developing the gas, issues that are now holding up final approvals, according to three industry sources familiar with the talks, who declined to be named due to the sensitivity of the matter.

"PetroChina, as a 50 per cent stakeholder in Arrow, expects to maximise interests from the JV versus QCLNG. But for Shell, it may be thinking of using its operator role at QCLNG to protect its interests," a Chinese oil industry executive said.

"We are working hard to manage approvals with joint venture partners," a Shell spokesman said.

PetroChina did not respond to a request for comment.

REUTERS