COST BLOW-OUTS FORCE OIL PRODUCER TO REVIEW CSG PROJECT

COST BLOW-OUTS FORCE OIL PRODUCER TO REVIEW CSG PROJECT

ARROW Energy’s coal-seam gas (CSG) export project in Queensland will go under review as the lucrative industry contends with inflated construction costs.

Arrow and project owner Royal Dutch Shell are holding talks with construction companies about the $20 billion venture, which is jointly operated by Arrow and China-based PetroChina.

The oil company is widely speculated to be communicating with potential gas buyers from Korea or Japan. Talks are anticipated to explore the potential integration of up to three liquefied natural gas (LNG) plants, which are currently being constructed on Gladstone’s Curtis Island.

BG Group, Santos-Total-Petronas and Origin Energy-ConocoPhillips have committed a combined $70 billion in funding for the merger.

However, the overheated resource-construction industry and skyrocketing expenses have forced Shell to delay granting final approval for the project.

Shell oil and gas production chief Andrew Brown told a press conference in New York that cost pressures may postpone investment approvals beyond his original 2013 timeframe.

A Shell spokesperson told Brisbane Business News that Arrow is working on a “standalone project, which is expected to be presented to parent companies Shell and PetroChina towards the end of 2013”.

“Shell has always said it will not be schedule driven, but rather take the time to get the project right and derive the best value solution,” says the spokesperson.

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