The alliance with Arrow is expected to boost Shell’s existing strategic positions in potential coal seam gas (CSG) areas including China, where Arrow’s international acreage is reported to be an excellent fit.
Arrow reportedly has significant CSG production facilities in Queensland, Australia, where it is the largest CSG acreage holder. It has four producing projects in Queensland, and supplies gas for industrial users such as power stations.
The memorandum of understanding calls for Shell to acquire a 30% interest in Arrow’s CSG acreage in Queensland, Australia, as well as a 10% stake in Arrow International, a wholly owned subsidiary of Arrow Energy, which holds Arrow’s international interests in CSG opportunities.
The agreement also gives Shell a five-year option to acquire up to 50% of individual Arrow International projects, which includes activities in China. Under the deal, Shell will also acquire the right to negotiate an agreement to purchase any liquefied natural gas that may potentially be produced from the CSG operations.
Shell and Arrow have also agreed to undertake further research and development in the growing area of gas supply. The total value of the agreement is expected to be up to $0.7 billion. Completion of a definitive agreement is anticipated in the near term.
