MELBOURNE (Reuters) - Royal Dutch Shell and PetroChina joint venture Arrow Energy on Thursday was granted leases for a A$10 billion (5.37 billion pounds) project to develop Australia's biggest coal seam gas resource.
The Queensland government said it had granted 14 leases to Arrow Energy for the Surat project, which holds 5 trillion cubic feet (140 billion cubic metres) of gas. Arrow agreed in December 2017 to a 27-year deal to sell output from Surat to the Queensland Curtis LNG (QCLNG) project run by Shell.
As part of the deal, Arrow will be using QCLNG's gas processing and pipeline infrastructure, helping to cut project costs and allowing Arrow to sell its gas both for export and into the domestic market.
"This approach has two major benefits: it will get gas to the market faster and it significantly reduces the project footprint and the potential impact on local communities and the environment," Queensland state Mines Minister Anthony Lynham said in a statement.
Queensland and the federal government are eager to see the Surat project start up as Australia's southeastern states face a looming gas shortage by the mid-2020s.
While state Premier Annastacia Palaszczuk said the project is expected to start producing in 2020, Shell and PetroChina have yet to give the go-ahead for development amid a spat over gas sales pricing and technical issues.
"The approval of these petroleum leases is a critical milestone in Arrow delivering 5 trillion cubic feet of gas into the market," Arrow CEO Mingyang Qian said in a joint statement with the state government.
(Reporting by Sonali Paul; Editing by Tom Hogue)