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Shell Keen’ on Stake in Australian LNG, Partner Says




Shell Keen’ on Stake in Australian LNG, Partner Says (Update1) 

By Dinakar Sethuraman

July 29 (Bloomberg) — Royal Dutch Shell Plc, Europe’s biggest oil company, is “keen” to acquire a stake and purchase the output from a coal-seam gas based fuel export project in Australia’s northeast, said Arrow Energy Ltd., a venture partner.

The venture, which is led by Liquefied Natural Gas Ltd. and includes Norway’sGolar LNG Ltd., may decide in the first half of 2009 to build the 1.5 million metric tons-a-year project, to start up by 2011, Nick Davies, chief executive officer of Brisbane-based Arrow, told a conference in Singapore. Shell has to offer the best price because there are other buyers competing for the fuel, he said.

Shell and Arrow in June signed a $700 million accord giving Shell a 30 percent stake in Arrow’s coal-seam gas licenses in Queensland and a 10 percent stake in Arrow’s international unit. Davies said then Shell would start negotiating with Perth-based LNG Ltd. to participate in the export project, which is one of five proposed for the Gladstone region based on coal-seam gas.

“You have to be absolutely low-cost in this business or your margins will get squeezed very quickly,” Davies told reporters at the conference. “Good gas prices are a prerequisite.”

India Plans

Arrow plans to use Shell’s expertise in gas from coal-seam areas to produce as much as 80 billion cubic feet a year of fuel by 2015 from China, India, Vietnam and Indonesia, Davies said. The company is drilling in three areas in India and plans to start drilling in China and Vietnam this year, he said.

“The main reason for the alliance with Shell is strategic,” Davies said. “TheLNG is secondary.”

Arrow Energy plans to start producing natural gas for commercial use by 2011 from three coal-bed methane areas in India, Davies said.

The company estimates 11 trillion cubic feet of gas reserves in its areas in India and plans to drill 39 wells, he said.

“India has an appetite for gas and recently paid as much as $20 per million British thermal unit for a spot LNG cargo,” Davies said.

To contact the reporter on this story: Dinakar Sethuraman in Singapore at[email protected]

Last Updated: July 29, 2008 02:20 EDT

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