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Arrow shares up 20% on $776m Shell deal

Arrow shares up 20% on $776m Shell deal

June 2, 2008 – 10:41AM

Royal Dutch Shell, Europe’s largest oil company, has formed a $776 million alliance with coal seam gas producer and liquefied natural gas (LNG) hopeful, Arrow Energy.

The oil giant will acquire a 30 per cent interest in Arrow’s upstream tenements for an initial payment of $435 million, with a further $209 million payable upon a final investment decision and production from an LNG project in Queensland.

Arrow is one of a number of players, which include Santos Ltd and Petronas and BG Group plc and Queensland Gas Company Ltd (QGC), jostling to be involved in the development of an LNG plant at Gladstone in QLD.

BG Group, the UK’s third largest natural gas producer, wanted to takeover Origin Energy Ltd to secure vast gas resources to feed its proposed LNG development with QGC.

Royal Dutch Shell will also acquire a 10 per cent stake in Arrow International Pte Ltd, the company that holds all of Arrow’s international assets, for $132 million.

Arrow shares jumped to a record high of $4.11 before easing back to be 67 cents, or 20.12 per cent, higher at $4.00 by 1039 AEST.

Arrow has an agreement with LNG International Pty Ltd to supply 55 petajoules of gas a year to a planned facility for a 12-year period starting in late 2010.

LNG International is 20 per cent owned by Bermuda-incorporated shipping company Golar, the world’s largest independent owner of LNG shipping transportation.

“Shell is extremely supportive of the potential for LNG development in Queensland, and of rapid international expansion,” Arrow chief executive Nick Davies said in a statement.

Royal Dutch Shell will have the right to offtake the LNG utilised from the tenements it has bought into under the agreement, Arrow said.

The transaction is being conducted through Arrow and Shell Exploration company, a subsidiary of Royal Dutch Shell.

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