Elliot you know your stuff, I was previously involved in the industry and your comments are spot on.
Even if the Arrow resources were developed and a pipeline built, it would most likely be the catalyst for Shell to develop an extra train for qclng, and then supply the back end of the 20 yr contracts for glng and aplng (once their wells start to deplete). To bring those reserves to domestic market in NSW would also be very costly once the various pipeline tariffs are considered. The location of SXY reserves in regards to existing infrastructure and proximity to NSW market make it the most obvious choice.
SXY deal with GLNG is only for 50TJ/day and if the reserves prove true they will have much more than this, there is likely to be some kind of clause in that contract to negotiate extra reserves but the ideal outcome would to have some of your gas on an JCC linked $US contract with an LNG player and the other on a fixed $AUD with a AGL or ALINTA.
In my view this move has been all to long coming, analysts have all been screaming of the impending gas shortage but none of them were willing to put their investment funds or banks money on the line. SXY showed prude management during the oil downturn and will now finally reap the benefits of their patience.
SXY Price at posting:
30.0¢ Sentiment: Hold Disclosure: Held
