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Shell says Arrow Gladstone LNG plant still on


10:02 p.m. CDT, May 13, 2012

ADELAIDE (Reuters) – Royal Dutch Shell still plans to build a liquefied natural gas (LNG) plant at the Australian port of Gladstone as part of its Arrow LNG development despite reports of rising costs, Shell Australia chairwoman Ann Pickard said on Monday.

Earlier this month, a source close to Arrow LNG, a joint venture between Shell and PetroChina , said costs may rise as much as 50 percent from initial estimates, which could force the companies to delay development.

“Obviously Shell has its own numbers, Arrow has its numbers, and PetroChina, our 50 percent partner, have their own numbers. From a Shell perspective, the project looks fine to me, but we are pretty conservative on our numbers. I don’t see any blowout or increases,” Pickard told reporters on the sidelines of an oil and gas industry conference in Adelaide.

Pickard also said that the Arrow LNG project intended to sell the initial “ramp up” gas from Arrow to other gas users in the area until the plant was built and ready to receive gas.

Arrow LNG is one of four projects on Australia’s east coast that aim to pump gas from coal seams to export facilities. The estimated investment for all the projects is rising rapidly from the initial price tag of around $70 billion.

The operator of one of the other four projects, BG Group , announced over $5 billion of cost overruns on its Queensland Curtis Island LNG earlier this month, with costs rising to $20.4 billion from $15 billion.

(Reporting by Rebekah Kebede; Editing by Richard Pullin)

Copyright © 2012, Reuters

Photo Credit: A Shell logo is seen at a petrol station (Umit Bektas Reuters, REUTERS / March 7, 2012)

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