Newspaper article The Observer (Gladstone, Australia)

Watch and Wait for Decision; Federal Govt, Foreign Investors to Determine Whether Arrow LNG Goes Ahead

Newspaper article The Observer (Gladstone, Australia)

Watch and Wait for Decision; Federal Govt, Foreign Investors to Determine Whether Arrow LNG Goes Ahead

Article excerpt

Byline: WORDS James McGrath

THE fate of more than 3500 potential jobs in Gladstone will be on the line in boardrooms in China and the Netherlands in the next six months.

Arrow Energy is awaiting a decision on whether its proposal for an 18million tonne per annum LNG plant, to join three other plants on Curtis Island, is palatable to the Federal Government.

But there are rumours swirling that when Arrow presents its final business proposition to Netherlands-based Shell and China-based PetroChina (co-owner of Arrow Energy), the multinationals may not find it so acceptable.

In fact, Shell has openly talked about the possibility of taking its gas from the coal seam gas fields of the Bowen and Surat basins, to help expand one of the other projects on the island.

The closer the stand-alone project gets to a self-imposed final investment decision, the more it seems it is being squeezed from two sides.

Global investors have become increasingly nervous about the cost of building such mega-projects in Australia and this may be turning off decision-makers.

Geoffrey Cann, an analyst with consultancy Deloitte, who is consulting with Arrow, said Australia has become the most expensive place in the world to build.

"The comparisons suggest a greenfield in Australia these days is north of $1500 per tonne and it's only going up," Mr Cann said.

He said construction of potential projects in the US had reached $600-$900 per tonne in comparison.

Mr Cann said the cost of greenfield construction (a project from scratch) has become so high in Australia that global gas players are starting to look at other options around the world.

The cost of construction in Australia is something Shell has long grumbled about.

In fact, the timing of its project has been designed to take advantage of what it sees as a cooling off in construction costs, as other LNG projects draw to a close.

But on the contrary, Mr Cann suspects there won't be a dramatic drop in costs, as the other Curtis Island projects draw to a close.

"They're all timed to finish at different times, so those workers will dissipate into the economy gradually," he said.

"So it's not like there's going to be a massive drop in the cost of workers.

"Not as much as one would suspect, anyhow."

There is also an evolving school of thought that Arrow is facing an uncertain time in getting a good price for its product, making concerns on costs doubly worrying.

For an LNG project to go ahead, a lot of the gas needs to be pre-sold.

Arrow has not locked down any of its gas sales yet, while the other projects on Curtis Island have binding contracts.

Most of Australia's LNG makes its way to Japan, Taiwan and South Korea - with an enormous appetite for gas driving the price in Japan to about $18 per million British thermal units (mmBtu). …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.