Australia’s east coast gas supply receives major boost with Surat Phase 2 approval

At a time when authorities are predicting potential major power blackouts, Australia’s east coast has received a significant energy boost with global giants Shell and PetroChina giving the green light for Phase 2 of the Surat gas project in Queensland.

Arrow Energy, a joint venture between Shell (50%) and PetroChina (50%), has revealed that Phase 2 is expected to contribute around 130 million standard cubic feet of gas per day at peak production, commencing in 2026.

The gas from the project will flow to the Shell-operated QCLNG facility on Curtis Island, near Gladstone, to meet long-term contracts and supply domestic customers as part of an existing 27-year gas sales agreement.

Increased supply

“Embarking on Phase 2 of the Surat gas project with Arrow is part of our commitment to bringing more gas to market,” Shell’s integrated gas and upstream director Zoë Yujnovich said.

“QCLNG marked its 1,000th cargo at the end of last year, reflecting its significance as a gas supplier for Australia and the region.”

“This investment will enable us to sustain and grow this important, secure energy source that offers a lower-emissions alternative to options like coal.”

Critical role

In announcing the go-ahead, Shell said LNG would play a critical role in the energy transition.

“It also has a continued role in displacing coal in power generation, helping to reduce local air pollution and carbon emissions,” the company said.

Phase 2 will comprise up to 450 production wells, a field compression station, 27 kilometres of new pipeline and road and infrastructure upgrades.

Senex expansion

In late June, Senex Energy announced it was moving ahead with a $1 billion expansion of its Atlas and Roma North natural gas developments in Queensland’s Surat Basin.

Senex chief executive officer Ian Davies said the clear solution to solving the looming energy issues was to develop more gas supply.

“The federal government has made it clear that gas is required until 2050 and beyond and that investment in new gas supply is needed if we are to reach net zero with thriving industries.”

Senex’s expansion will deliver 60 petajoules of natural gas each year – more than 10% of annual domestic gas requirements – to the east coast market from the end of 2025.

Another Queensland option

Elsewhere, Blue Energy (ASX: BLU) has identified a low-cost opportunity to improve gas flow at its Sapphire pilot well program in Queensland.

The company is considering the “twinning” of one of the existing lateral wells to target a single coal seam.

That program would be undertaken without a drilling fluid program with no additives after an independent review identified potential formation damage possibly related to a component of the fluid used in the pilot well drilling.

The Sapphire Pilot is located immediately adjacent to the producing Moranbah Gas Project (MGP).

Prices on the rise

News of the proposed major increase in Australian gas production comes at a time when rising geopolitical risks have pushed global gas prices higher, with European gas benchmark futures trading near their highest level this year on fears of supply shortages.

“For the moment, Russian gas continues to flow through Ukraine into Europe despite reports that Ukrainian troops had seized a key gas transit point near Sudzha, Russia,” ANZ senior commodity strategist Daniel Hynes wrote in his daily Commodities Wrap.

“European officials are in talks to keep gas flowing as they race to prevent the war from further damaging the continent’s energy supply.”

“One option being discussed is for European companies to buy and inject gas from other locations into Russian pipelines heading to Europe.”

North Asian LNG prices have also risen on the growing Middle East and Russian tensions.