Surat Gas Project to begin construction in 2020

Construction of the Surat Gas Project (SGP) is set to begin in 2020 in southern Queensland, after Arrow Energy sanctioned the first phase of the $10 billion project.

Arrow’s sanction decision follows an announcement from its shareholders, PetroChina and Shell, of a final investment decision (FID) for phase one of the SGP.

Arrow CEO, Cecile Wake, said, “The decisions by PetroChina, Shell and Arrow demonstrate commitment to and confidence in Queensland and the Australian market at a time of global economic turmoil from COVID-19, and against the backdrop of sustained low oil prices.

“This significant investment comes at a critical time and will cement Arrow’s position as a major producer of natural gas on the east coast.

“The Surat Gas Project is the first large-scale CSG project in Australia to be underpinned by a significant infrastructure collaboration and gas sales agreement, together with a suite of supporting agreements, which have been put in place between Arrow and the Shell-operated QGC joint venture [a joint venture between Shell (73.75 per cent), CNOOC (25 per cent) and Tokyo Gas (1.25 per cent)].

“This agreement enables the use of capacity in QGC’s existing gas and water processing, treatment and transportation infrastructure, reducing the impacts on landholders, communities and the environment and ensuring that more gas can be economically developed.

“Importantly, there have been sustained efforts by Arrow, its landholders and local communities to jointly develop tailor-made ways of working on high-quality black soil with minimised impacts, which will be the foundation of positive co-existence into the future.”

Ms Wake said Arrow would commence construction of more than 600 phase one wells in 2020, and is on track to deliver first gas from the project in 2021.

The Surat Gas Project will bring an extra 5000PJ of gas to market over 27 years – including about 270TJ/day during phase one’s peak production, towards a whole-of-project peak of 700TJ/day.

Queensland Premier, Annastacia Palaszczuk, said the project would mark another milestone in Queensland’s economic recovery from COVID-19.

“We have made very encouraging progress in managing the health impacts of this pandemic,” Ms Palaszczuk said.

“But it’s projects like this – and the more than 1,000 jobs it will generate – that will help us to our economic recovery.”

Queensland Minister for Mines, Natural Resources and Energy, Dr Anthony Lynham, said, “The first phase will create 200-plus construction jobs, which will start almost immediately, as well as millions of dollars in business opportunities for local suppliers.

“The project, over all phases, will create up to 800 construction jobs and 200 permanent operations jobs – Queensland’s largest gas project to start since 2011.”

Major investment at a critical time

Ms Wake said, “Arrow recognises the current uncertainty caused by COVID-19 and oil-price volatility, and will ensure that its development plans retain sufficient flexibility to manage these evolving challenges while bringing more gas to market.

“The decision to sanction phase one of the Surat Gas Project and commence construction this year is good for Queensland.

“It will mean more jobs, more opportunities for local companies and other economic benefits for regional Queensland, which has been home to Arrow for more than 20 years.”

“In these challenging COVID-19 times, Arrow remains committed to operating its business and executing this project safely and responsibly to protect the health and wellbeing of its people and all of the regional communities where we operate.”

Arrow currently operates five gas fields in the Surat and Bowen basins in southern and central Queensland, respectively, and produces the equivalent of more than 40 per cent of Queensland’s total domestic gas demand.

Toowoomba and Surat Basin Enterprise (TSBE) CEO, Ali Davenport, said, “This is positive news, especially with so much disruption caused by COVID-19, and will generate opportunities and revenue for the Western Downs region.

“Construction jobs have many beneficiaries, with workers spending money locally on restaurants, accommodation, entertainment venues and retail.

“Other beneficiaries from SGP will be the agricultural sector who will be able to utilise the filtered wastewater, which means yields will be higher for our region’s producers.”

“This project is another confirmation of how important the energy sector is to our regional economy.”

APPEA Chief Executive, Andrew McConville, said, “This significant investment comes after Arrow has devoted over ten years to assessing the project, working with landholders and the broader community, and closely collaborating with government.

“It comes at a critical time as Queensland meets the economic challenges posed by the COVID-19 pandemic, and Australia increases its focus on energy security and maintains our trading relationships.”

Federal Minister for Resources, Water and Northern Australia, Keith Pitt, said, “This is a real vote of confidence in Australia’s gas industry and the energy policy settings that have been established by the government.

“It is a welcome shot in the arm for regional businesses especially in the Western Downs region of Queensland.

“Arrow holds the largest undeveloped reserves on the east coast at around 5 trillion cubic feet.

“The Australian Energy Market Operator has highlighted that new gas is going to be required into the east coast market by 2024. Arrow is going to be an important part of delivering that new gas.”

The Federal Government said Arrow’s commitment to work with local farmers and communities as the project develops, including protecting workers and communities during the COVID-19 pandemic, was commendable.

“Notwithstanding COVID-19, our energy and resources will be important in getting not just our economy back on its feet, but vital in assisting our important trading partners to kickstart their economies,” Mr Pitt said.

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