Royal Dutch Shell, whose relatively muted approach to the coal-seam gas race in Queensland has so far proven the most puzzling of the major oil giants, has decided to assist Arrow Energy in its purchase of a stake in the Tipton West field. Shell will give Arrow $99 million in return for a 30 per cent share of the additional interest in the field being acquired from Beach Petroleum by exercising a pre-emptive right.
Shell, which last month had its proposed liquefied natural gas project in Gladstone declared a "significant project" by the Queensland Government, had stood aside earlier this year when Arrow was bidding against BG Group of Britain for the explorer Pure Energy Resources.
Having received no financial backing from Shell, Arrow's cash-and-scrip bid lost out to a $1 billion all-cash offer from BG.
Arrow still plans to send its gas to a separate LNG plant from the one proposed by Shell, despite their upstream alliance. It expects its Fishermans Landing project could be in production by 2012, which is at least two years ahead of the competing LNG projects in the region, although it is also in talks with Shell about providing gas to the oil giant's larger project.
Many analysts believe it is only a matter of time before Shell decides to buy its partner to ensure it has sufficient gas for its planned project, which could entail four production trains.
AOE Price at posting:
$3.62 Sentiment: LT Buy Disclosure: Held
