Shell may eye off Curtis Island LNG plants as costs bite

Shell may consider using Curtis Island gas plants to help reduce costs in its Arrow coal seam gas project.
Shell may consider using Curtis Island gas plants to help reduce costs in its Arrow coal seam gas project. Brenda Strong

WHILE Gladstone's gas giants are taking a relaxed approach to cost blowouts in their projects, Royal Dutch Shell is reviewing the ownership structure of the planned $20 billion Arrow coal seam gas export project in Queensland.

News Ltd reports the oil and gas giant has begun talks with third parties to help it develop the project, but says it may delay approval as it waits for the overheated construction market to cool.

Shell, which has long been warning of high costs for local LNG projects, has also told investors not to expect first LNG in 2014.

With China already represented through PetroChina, Shell may be in talks with potential gas buyers, such as Korean or Japanese utilities.

It may also be considering combining with one or more of the three LNG plants already in construction on Gladstone's Curtis Island.

All of those sites have space for extra LNG trains - which would reduce Arrow's cost - and are facing big cost pressures.

The BG and Santos projects also appear to be short of gas to run at full capacity in their early stages.

"With three projects under construction at Curtis Island, it makes sense to think about the best value solution for Shell and get the timing right," oil and gas production chief Andrew Brown said.

Topics:  arrow energy, coal seam gas, curtis island, lng

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