Shell, PetroChina make bid for Arrow

SYDNEY, March 9 (UPI) -- Oil giant Royal Dutch Shell made a $3.3 billion bid with PetroChina to acquire Australian coal-seam gas developer Arrow Energy Ltd.

Arrow is Australia's largest holder of coal-seam gas acreage with interests covering more than 16 million acres in Queensland. Less than 10 percent of the land has been explored.

Energy groups plan to extract methane by drilling into coal seams and pipe the gas overland to Gladstone where it will be converted into liquefied natural gas and shipped to Asia.

Arrow hopes to make its first shipments to Asia in 2012, possibly in advance of competing projects being developed by the United Kingdom's BG Group, a joint venture between ConocoPhillips and Australia's Origin Energy and another between Australia's Santos and Petronas of Malaysia, the Financial Times reports.

If the deal goes through, it would give Shell and PetroChina direct control of 37 percent of Australia's proven coal seam gas reserves, regarded by oil companies as an important resource for meeting China and Southeast Asia's rising energy demands.

Shell has been eyeing Arrow for nearly two years. It already owns a 30 percent stake in Arrow's Queensland coal-bed holdings.

Shell's partnership with PetroChina is on a 50-50 basis and is thought to include an agreement for the Chinese oil group to take half of the LNG produced by the Australian project.

China aims to triple the use of gas as it attempts to cut its reliance on coal. According to the Telegraph newspaper, the chairman of PetroChina, the country's biggest oil and gas producer, said Monday the company would work toward increasing its liquefied natural gas resources this year.

Last year the company signed a 20-year $45.3 billion deal with Exxon Mobil for gas from Australia's massive Gorgon field.

"The gas industry is relatively underdeveloped and it has become an increasingly important source of energy in China," Shi Yan, an energy analyst at UOB-Kay Hian Ltd. in Shanghai, told Bloomberg News. "It appears that this bid is in its early stages but it's part of China's efforts to secure supply."

Richard Griffith, an oil analyst at Evolution Securities, said he believes the deal is a logical step for Shell, which is building a large LNG plant in Queensland that could be used to export Arrow's gas to Asia, The Times Online reports. "It makes sense for Shell," he said. "The Asian market is very hungry for energy and PetroChina is an obvious partner."