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Shell Pressing On With Gladstone LNG, Open To Consolidation

THE WALL STREET JOURNAL

JUNE 10, 2009, 9:11 P.M. ET

SYDNEY (Dow Jones)–Royal Dutch Shell PLC (RDSB.LN) says it’s open to consolidation with rival liquefied natural gas projects in Queensland state but is pressing ahead with plans for a terminal on its own.

“We are in a good position to establish a CSG-LNG facility; however, we do recognize that consolidation should not be ruled out,” a Shell spokeswoman said in a statement received Wednesday.

“At this point in time, we continue to progress our project as a standalone utilizing gas from our Arrow alliance.”

Shell last year acquired 30% of Arrow Energy Ltd.’s (AOE.AU) coal seam gas assets, but some analysts are concerned it hasn’t got access to adequate reserves to feed a large-scale LNG plant, and lags behind rivals in terms of the size of its proven reserves base.

Another four CSG-LNG facilities are planned to be built at Gladstone amid a fall in LNG demand and fears of a regional LNG supply glut. Several of the large-scale ventures have already said they would be open to some form of project collaboration at the plant or reserves levels.

Unlike some of its rivals at Gladstone, Shell is already sitting on a considerable amount of LNG sourced from traditional natural gas that it can use to meet Asian customer supply contracts, so it might not be in as big a hurry to develop CSG-LNG.

Arrow has said previously that it has enough gas to support a Shell LNG plant as well as the single smaller-scale plant being built at Gladstone by Liquefied Natural Gas Ltd. (LNG.AU).

The Shell spokeswoman said Arrow is a “large CSG acreage holder in Queensland” providing potential gas supply for LNG production.

“A key aim of the partnership was to learn from and leverage the Arrow CSG capability more widely in Shell, while we recognized that there was price upside from the export of LNG,” the spokeswoman said.

More details of Shell’s plans for Gladstone could be revealed in a matter of days, with the Queensland government currently considering whether to grant the proposed development “significant project” status, allowing for the submission of an environmental impact statement.

Shell submitted its initial advice statement for the government’s consideration on May 13. The statement will be released in full to the public once a government ruling is made.

“The decision is still in the works,” a government spokeswoman said Thursday.

A rival project being built by ConocoPhillips (COP) and Origin Energy Ltd. (ORG.AU) received significant project status from the Queensland government on April 7 after submitting an initial advice statement dated March 27.

Shell in February said it had commenced feasibility studies for an LNG plant at Gladstone, but it has since been relatively coy about its intentions.

-By Ross Kelly, Dow Jones Newswires; 61-2-8235-2957; [email protected]

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