NOVEMBER 2, 2011, 4:52 A.M. ET

By DAVID WINNING And DAVID FICKLING

SYDNEY—Australia’s foreign-investment watchdog has pushed back by up to 90 days a decision on the takeover of coal-seam-gas developer Bow Energy Ltd. by a joint venture of Royal Dutch Shell PLC and PetroChina Co.

In a government notice to parliament, the Foreign Investment Review Board said it needed more time to decide whether to approve the 535 million Australian dollar (US$557 million) deal, which would enable Shell and PetroChina’s Arrow Energy venture to expand its proposed gas-export facility in Queensland state.

Such delays are unusual: Around 95% of FIRB decisions are made within a 30-day period set out in law, and so-called interim orders extending the process by 90 days were made just twice during the year ending June 2010, the latest period for which figures are available.

But Arrow said the decision was procedural, to allow the Australian Competition and Consumer Commission to complete its review of the deal, due Nov. 24.

“This allows FIRB to defer its decision until the ACCC has completed its review of any competition implications of the transaction,” Arrow said in an emailed statement.

Companies facing such procedural hurdles typically withdraw their FIRB applications and resubmit them later, but that would restart the 30-day clock—and so risk the timetable on the takeover deal. It calls for approval by shareholders and an Australian court in mid-to-late December, according to an announcement Monday from Bow.

Bow’s board has unanimously recommended investors vote in favor of the A$1.52-a-share (US$1.58) offer, and Shell said in September that it expected the transaction to be implemented in January.

Coal-seam gas—methane trapped far below the Earth’s surface—is one of the world’s hottest energy plays. More than A$20 billion was spent in 2008 on coal-seam-gas deals in Australia alone, by companies including Shell, ConocoPhillips and BG Group PLC of the U.K.

In August, Arrow Energy awarded preliminary engineering and design contracts for an export facility at Curtis Island, near Gladstone, producing an initial eight million metric tons of liquefied natuaral gas a year. Acquiring Bow Energy would allow the venture potentially to expand the annual output capacity of each of the facility’s two processing units, known as trains, to 4.6 million tons of LNG.

Write to David Winning at david.winning@dowjones.com and David Fickling at david.fickling@dowjones.com

SOURCE ARTICLE

By James Paton

Sept. 26 (Bloomberg) — Arrow Energy Ltd., owned by Royal Dutch Shell Plc and PetroChina Co., agreed to buy Bow Energy Ltd. after sweetening its offer to A$535 million ($516 million), gaining resources for a natural gas project in Australia.

The coal-seam gas explorer and producer in Queensland state increased its cash offer to A$1.52 a share from A$1.48, Brisbane-based Bow said in a statement today. That’s 72 percent more than the stock’s price of 88.5 cents in Sydney trading before Arrow made its initial offer on Aug. 22.

Arrow plans the fourth liquefied natural gas venture in Queensland to meet rising Asian demand for the fuel, following approvals for more than $50 billion in developments led by BG Group Plc, Santos Ltd. and ConocoPhillips. The acquisition may allow Arrow to expand output at the venture’s first two units, or trains, by as much as 15 percent, the company said today.

“These big LNG project developers will need more gas” to underpin additional processing units, Ivor Ries, an analyst at E.L. & C. Baillieu Stockbroking Ltd., said by telephone today from Melbourne. “We’ll see more consolidation.”

Bow rose 0.3 percent to A$1.465 at 4:10 p.m. in Sydney. Bow has gained 66 percent since Aug. 19 on the Australian stock exchange, before Brisbane-based Arrow made its initial offer.

‘Good Deal’

The Arrow accord values Bow at about 16 cents a gigajoule of proven, probable and possible reserves, compared with an average of about 50 cents a gigajoule for Australian coal-seam gas transactions over the past two years, Andrew Williams, an analyst at RBC Capital Markets in Melbourne, said by phone.

“This is a very good deal for Arrow,” Williams said.

The Arrow LNG venture may cost more than $20 billion to develop, Deutsche Bank AG estimated in a Sept. 23 report. Bow had been the subject of takeover speculation since Santos, Australia’s third-largest oil and gas producer, agreed in July to pay about A$730 million to buy the shares in coal-seam gas explorer Eastern Star Gas Ltd. it didn’t already own.

“Our project is proceeding quite nicely on our existing reserves,” Andrew Faulkner, Arrow’s chief executive officer, said in a phone interview today. The transaction provides “the opportunity to take that project to the next level, to expand the train size and to strengthen our reserves base,” he said.

The Bow deal may allow Arrow to expand the size of each of the first two LNG processing units on Curtis Island to as much as 4.6 million metric tons of the fuel a year from the current plan of 4 million tons a year, Faulkner said. Arrow is on track to make a final investment decision in late 2013, he said.

‘Superior Bid’

Bow’s board recommends that shareholders vote in favor of the proposal in the absence of a “superior” bid, according to the statement. The accord is subject to regulatory approvals in Australia and China, and Bow shareholders are due to vote on the deal in December, the companies said in separate statements.

Bow said it is being advised by Bank of America Corp. and Wilson HTM Investment Group, while Arrow said it named JPMorgan Chase & Co. as a financial adviser.

The offer “absolutely reflects the underlying value of Bow’s assets and resources,” Arrow’s Faulkner said in the interview. “The price acknowledges the volatility and the technical and commercial uncertainties that are out there.”

The coal-seam gas industry on the east coast of Australia “must repair damage and rebuild the trust” of communities amid criticism from environmental groups who say the drilling of wells may contaminate water supplies, Elaine Prior, a Citigroup Inc. analyst in Sydney, said in a Sept. 21 report.

–Editors: Keith Gosman, Amit Prakash

To contact the reporter on this story: James Paton in Sydney jpaton4@bloomberg.net.

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

SOURCE ARTICLE

From pages 31 & 32 of “Royal Dutch Shell and its sustainability troubles” – Background report to the Erratum of Shell’s Annual Report 2010

The report is made on behalf of Milieudefensie (Friends of the Earth Netherlands)
Author: Albert ten Kate: May 2011.

Unconventional gas and high-volume fracking

Not only for oil, but also for gas Shell is resorting to unconventional production methods. In December 2010, Shell-CEO Peter Voser stated: “In recent years, Shell has increased investment in natural gas projects in countries like Qatar, Australia, Russia, the United States and Canada, with a special focus on tight gas, shale gas and coal-bed methane – together these are known as unconventional gas. We’re currently exploring the potential for unconventional gas outside North America in countries like China and South Africa, as well as some European countries.” The Shell-CEO proceeds: “I know by 2012 Shell will be producing more gas than oil, and, I know, when it comes to natural gas supplies, a revolution is under way. (…) Shell is set for strong growth in tight gas.”

Conventional natural gas is usually found trapped in the pore space of rock types like sandstone in underground geologic formations. Compared to unconventional gas, conventional gas flows rather easily to drilled wells. For unconventional gas, often high-volume fracking is used as a technique to get the gas to the surface. Fracking (or hydraulic fracturing) involves injection of water, mixed with sand and chemicals to ease production of natural gas and oil by breaking up rock formations. Fracking has been done around the world for many years. However, high- volume fracking is a rather new phenomenon and causes much more environmental damage and health risks. From this point of view, the revolution that is under way according to Shell-CEO Peter Voser, may in fact be a quite worrying revolution.

Tony Ingraffea, professor of Civil Engineering at the Cornell University in the U.S. State of New York, has conducted much research on fracking. During a radio interview in February 2011, he asked himself the question: “What is high-volume fracking, compared to the traditional historical kind that no one seems to be complaining too much about?” His answer was: “The difference is about a factor of hundred in just about everything, predominantly the amount of fluids that are necessary to do the fracking [including the amount of chemicals; the professor mentions this later in the interview], the amount of fluids and other waste products produced from a high- volume unconventional well that’s fracked, the amount of truck traffic, the amount of energy and power that needs to be brought to a well. (….) It’s not the issue of fracking, it’s the entire system of developing gas from an unconventional resource.”

Shell’s positions in unconventional gas

Shell is rapidly expanding its positions in unconventional gas (tight gas, shale gas and coal-bed methane). Below its main present positions around the world are listed:

− North America. Shell’s North American tight gas production amounted to some 140,000 barrels of oil equivalent per day in 2009, an increase of 62% from 2008 levels. Shell expects that its production could double from 2009 to 2015. Its activities in U.S. tight gas began in 2001, with purchases in the Pinedale Anticline in Wyoming State. More recently, Shell secured unconventional gas positions in the Haynesville play in Texas/Louisiana State and in Western Canada (Groundbirch, Deep Basin, Foothills, Klappan). Its 2010 acquisitions are mainly in the Marcellus shale, the biggest natural gas field in the United States, covering most of Pennsylvania state and parts of New York, Ohio and the Virginia states. Another 2010 acquisition was within the Eagle Ford shale play, in South Texas.

− South Africa. Shell wants to start shale gas exploration activities within the Karoo eco-region in South Africa. The exploration area would comprise 90,000 square kilometres, more than two times the surface of the Netherlands.190 Shell has applied for three exploration areas, each comprising 30,000 kilometres. In each area it wants to drill up to eight exploration wells. The formations in the Karoo that are believed to contain recoverable gas are located 1.5 to 4.5 kilometres below the surface.

− China. Shell and PetroChina operate Changbei, a tight gas field in the Shaanxi Province of China. Commercial production in Changbei began in March 2007, supplying 3 billion cubic metres of natural gas a year to Beijing and other cities in eastern China. Late 2007, Shell took over a 55% equity interest in a coal-bed methane venture in Shaanxi Province. In the Sichuan province, Shell works together with PetroChina on developing two tight/shale gas reservoirs of each 4,000 square kilometres.192 Shell provides little information about the environmental impacts of its Chinese operations.

− Australia. In August 2010, Shell and PetroChina (majority owned by the state company CNPC, China National Petroleum Corporation) completed their acquisition of the Australian company Arrow Energy. The 50/50 joint venture called CS CSG (Australia) Pty Ltd. now owns coal seam gas assets in Queensland state, domestic power businesses, and a site to build a liquefied natural gas (LNG) plant for export markets. Coal-bed methane is natural gas contained in coal seams. The new joint venture will be the operator of the coal seam gas assets. The gas production assets are in the Surat and Bowen basin. In the Surat basin, there is no fracking done. In the Bowen basin, there might be.

− Other. Shell also has unconventional gas positions in Sweden, Germany, Ukraine and Brazil.

A further extract from this section of the report will be published in the coming days.

THE COMPLETE 73 PAGE REPORT (with reference sources)

By Stephen Bierman – Sep 24, 2010

The takeover of gas producer Arrow Energy Ltd. by Royal Dutch Shell Plc and PetroChina Co. will generate a A$326 million ($308 million) profit for shareholder New Hope Corp., giving the coal miner more cash for acquisitions.

Sept. 13, 2010, 6:13 p.m. EDT press release

ForestEthics: CEO of Royal Dutch Shell Confronted by Protestors During World Energy Congress

photo-credit: ForestEthics (click on photo to view high resolution image)

VANCOUVER, BRITISH COLUMBIA, Sep 13, 2010 (MARKETWIRE via COMTEX)

Before his keynote address today at the World Energy Congress in Montreal, CEO of global energy giant Royal Dutch Shell, Peter Voser was confronted by environmentalists to “get the Shell out” of Sacred Headwaters.

A brochure, mocked up as a Shell publication, was handed out to Voser and 1000 Congress attendees, ridiculing Shell’s activities to drill coalbed methane in the Sacred Headwaters.

“Shell cannot call themselves socially responsible when they have dismissed and undermined clear opposition from residents and communities in the Skeena, Nass, and Stikine watersheds,” said Shannon McPhail, Executive Director of Skeena Watershed Conservation Coalition.

For the rest of the release, please visit http://ow.ly/2DFzk

High resolution photo (credit to ForestEthics) http://ow.ly/2DFA5

Contacts:
ForestEthics
Claudia Li
Media Contact
604-331-6201 ext. 224

MarketWatch ARTICLE

The Sydney Morning Herald

August 19, 2010 – 11:09AM

AAP

A ceremony in Queensland has marked the takeover of coal seam gas company Arrow Energy Ltd by international oil giant Royal Dutch Shell and PetroChina Co Ltd.

She said her government was committed to developing the LNG industry, subject to strict environmental regulations.

© 2010 AAP

SOURCE ARTICLE

SYDNEY (Reuters) – Arrow Energy (AOE.AX) shareholders approved a $3.05 billion takeover by Royal Dutch Shell (RDSa.L) and PetroChina’s (0857.HK) on Wednesday, clearing the way for a final legal go-ahead due later this week.

Shareholders voted to demerge Arrow’s international assets into Dart Energy, a newly listed entity, and to sell the bulk of the company, including the coveted coal-seam gas assets to a consortium of Shell and PetroChina in an agreed deal.

The deal cleared a major regulatory hurdle on Wednesday after the National Development and Reform Commission of China recommended the offer and waived a requirement to obtain clearance from the State Administration of Foreign Exchange of China.

The last hurdle for the deal will be approval from the Federal Court of Australia, which is due to rule on the spin-off on July 16.

The Shell-PetroChina joint venture will integrate Arrow’s Australian assets with Shell’s existing CSG assets and Shell’s site for a planned Liquefied Natural Gas (LNG) plant on Curtis Island, Queensland, the companies said previously.

Shell and PetroChina will each own 50 percent of the gas produced by the LNG plant and the Anglo-Dutch oil major said it was likely to sell its gas to China.

^> Shell and PetroChina offered A$4.70 a share for most of Arrow’s domestic coal seam gas assets. Arrow shareholders are also set to receive one share in Dart Energy, for each share in Arrow.

Arrow shares, which have risen more than 20 percent so far this calendar year, last traded at A$4.99.

(Reporting by Michael Smith; Editing by Ed Davies and Balazs Koranyi)

THE WALL STREET JOURNAL

MAY 4, 2010

SYDNEY (Dow Jones)–Royal Dutch Shell PLC (RDSB.LN) said Wednesday there has been no change to it and PetroChina Corp.’s (PTR) A$3.44 billion takeover offer for Arrow Energy Ltd. (AOE.AU).

“There’s been no change to the proposed offer following FIRB (Foreign Investment Review Board) approval,” a Shell spokesman said.

“Shell continues to look at the impact of the government proposal across all of our Australian investments,” the spokesman said, referring to the resource super profits tax announced this week by the Australian government.

The spokesman declined to comment on whether there might ever be a change to the terms of the deal.

-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; ross.kelly@dowjones.com

WSJ ARTICLE