Final Investment Decision Delayed on Arrow LNG Project on Australia's Curtis Island

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Researched by Industrial Info Resources (Perth, Australia)--Industry insiders have believed for some time that Curtis Island would not see the start of another major liquefied natural gas (LNG) project. The small island in Gladstone Harbour is already home to the Australia Pacific LNG project (APLNG), led by Origin Energy Limited (ASX:ORG) (Sydney, New South Wales) and ConocoPhillips (NYSE:COP) (Houston, Texas); the Queensland Curtis LNG project (QCLNG), led by BG Group (LSE:BG) (Reading, England); and the Gladstone LNG project (GLNG), led by Australian gas company Santos Limited (ASX:STO) (Adelaide, South Australia).

These three projects are already at varying stages of construction. When complete, they will be among the first to utilize coal seam gas (CSG), also known as coal bed methane (CBM), as a source to produce LNG for export to Asia. Although not yet complete, there is already speculation that lower-than-expected results from the thousands of gas wells already drilled for these three major projects will result in a shortfall between the gas sales contracts and actual production figures.

In the face of underperforming gas fields, along with continually increasing construction costs and increased international competition, many expected the final investment decision on the Arrow LNG Project to be postponed.

That speculation seems to have been confirmed, with Royal Dutch Shell plc's (NYSE:RDS.A) (The Hague, Netherlands) chief executive Ben van Beurden stating recently, "We are not expecting any major financial investment decisions in Asia Pacific LNG in 2014."

The project is a 50:50 joint venture between Shell and PetroChina Company Limited (NYSE:PTR) (Beijing, China), China's largest oil & gas producer and distributor. This follows the announcement of the loss of between 400 and 600 jobs at Arrow Energy Pty Limited, the company formed by the joint venture to operate the project.

Arrow LNG is only one casualty of Shell's efforts to reduce costs in Australia, with a number of other investments set to be sold, including the company's existing terminals and refineries across the country. Shell also has announced that it likely will sell its $7 billion stake in Woodside Petroleum (ASX:WPL) (Perth, Western Australia) as the company continues its efforts to reduce costs and debt across its global operations.

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