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Arrow Energy to Spend A$300 Million Seeking Gas for LNG Plants

By Ben Sharples

Aug. 26 (Bloomberg) — Arrow Energy Ltd., Royal Dutch Shell Plc’s Australian partner in coal-seam gas production, will spend A$300 million ($251 million) drilling wells to supply gas to two planned liquefied natural gas plants in Queensland.

The work is scheduled for the next 18 months, Chief Executive Nick Davies said. “With multiple LNG trains planned, reserve certification is key to success for us,” he said on an earnings conference call today. Full-year net income jumped more almost 10-fold to A$366.9 million after the sale of stakes in fields to Shell, Arrow said.

Brisbane-based Arrow will supply the Fisherman’s Landing and Shell’s Curtis Island LNG projects at Gladstone in central Queensland state. They are among five ventures planning to tap gas extracted from coal seams for conversion to liquid form and export to Asia. Australia’s coal-seam gas industry attracted about A$22 billion in investment last year.

A final investment decision on Fisherman’s Landing is expected in the first quarter of 2010, Arrow said. The venture, in which Arrow has an option to participate, will have capacity to produce 1.5 million tons of the fuel a year and is being developed by Liquefied Natural Gas Ltd.

Shell, Europe’s biggest oil company, made a A$3 billion ($2.5 billion) offer for Arrow, with talks ending in a “stalemate,” London’s Sunday Telegraph reported this month. Arrow said Aug. 13 it had held talks with parties about its coal-seam gas assets that included discussions about a change of control, without receiving a takeover offer.

Shell owns 30 percent of Arrow’s Australian acreage and a 10 percent stake in Arrow’s international unit.

To contact the reporter on this story: Ben Sharples in Melbourne at [email protected]

Last Updated: August 26, 2009 02:56 EDT

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