THE $20 billion Arrow LNG project joint-owned by Shell and PetroChina has sold its coal seam gas exploration interests in northern NSW to Dart Energy, for a nominal sum, as it focuses on its Queensland interests.
Dart announced on Tuesday it had acquired the 7100-square-kilometre PEL445 licence, in the Clarence Moreton Basin, from Arrow for what it described as a "modest cash payment". Arrow has so far drilled 15 exploration wells and it is understood the licence area - which spreads inland from Byron Bay and Lismore - could have as much as 18 trillion cubic feet of gas in place (although a much smaller amount of gas is likely to be economically recoverable).
Dart was spun off after Shell and PetroChina bought Arrow in 2010. Dart said its management team was familiar with PEL445 and its potential because it had carried out the majority of exploration work done to date while at Arrow. The same coal seams are being targeted by fellow ASX-listed junior Metgasco, giving rise to stiff community opposition.
Dart's Australian chief, Robbert de Weijer, said "we realise there are some concerns in the community".
"We definitely will put in some effort to engage. The more you engage, the better people will understand it. It's a very safe industry, and much cleaner than coal."
Mr de Weijer said PEL445 was very prospective and the opportunity to explore the licence could take priority over Dart's other Australian prospects including in Sydney where Dart had hoped to drill in the suburb of St Peters. It is also pursuing a coal seam gas development at Fullerton Cove near Newcastle.
A Bell Potter energy analyst, Johan Hedstrom, said the quality of the coals in the Clarence Moreton Basin was "not as good as it is in the Surat Basin" in Queensland, where much of the CSG development is based. Mr Hedstrom said the coals were lower-permeability which made it difficult to get commercial rates of flow, as Metgasco had found.
"There's a question mark, really, on whether these coals are going to be productive in a commercial sense. So I don't think there would have been a big amount of money given to Arrow, to pick up this licence." Mr Hedstrom said Arrow probably did not consider the acreage that prospective, although "beauty is in the eye of the beholder".
Mr de Weijer said in Britain Dart was getting flow rates of 800,000 cubic feet per day, where the permeability of coals was lower than in Australia, using horizontal drilling and without fracking.
Arrow had planned to reach a final investment decision this year on its $20 billion export LNG project but last week the chief executive of Shell, Peter Voser, warned that the Australian LNG sector and any approval for the Arrow project would "take more time".