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Shell and PetroChina disagree over gas sales pricing

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LNG Industry,

According to Reuters, Royal Dutch Shell and PetroChina are currently in disagreement regarding gas sales pricing at their Arrow Energy joint venture (JV).

Reuters reports that the dispute is causing delays to the development of Australia’s biggest coal seam gas resource.

The Surat gas resource was acquired by the two companies as part of the AUS$3.5 billion takeover of Arrow Energy in 2010. Originally, it was expected that a final investment decision (FID) would be taken in 2018, with first production expected in 2020.

According to Reuters, that was after the Arrow Energy JV reached a deal in December 2017 to supply gas from Surat to the Queensland Curtis LNG plant (QCLNG) for a 27-year term.

Reportedly, however, PetroChina is not satisfied with the price in the sales agreement with QCLNG, as well as the technical plan for the development of the gas. Reuters reports that these issues are now leading to delays in final approval.

Reuters quoted one Chinese oil industry executive as saying: “PetroChina, as a 50% stakeholder in Arrow, expects to maximise interests from the JV versus QCLNG. But for Shell, it may be thinking of using its operator role at QCLNG to protect its interests.”

A Shell spokeswoman added: “We are working hard to manage approvals with joint venture partners.

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