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MELBOURNE (Reuters) - Arrow Energy, owned by Royal Dutch Shell (RDSa.L) and PetroChina (601857.SS), said on Monday it would begin design work on an expansion of its Tipton natural gas project in Australia that could help avert a looming fuel shortage in the country.
Arrow gave no timeframe for making a final investment decision on expanding the Surat Basin field in Queensland state, but said it was looking at ways to get the gas into the east coast market, which faces shortages within the next two years.
"I am expecting that we will reach agreement on a path to market for the majority of Arrow's Surat Basin gas reserves later this year," Arrow CEO Qian Mingyang said in a statement.
"This project continues the development of the Arrow resource which will see more gas in the market," Qian said.
The expansion would boost capacity at Tipton to more than 80 terajoules (TJ) a day from 33 TJ/day.
The extra capacity of more than 17 petajoules (PJ) a year would help fill a shortfall of between 10 PJ and 54 PJ a year forecast by the Australian Energy Markets Operator (AEMO) in the east coast gas market between 2019 and 2024.
Arrow's coal seam gas reserves in the Surat and Bowen basins are among the biggest undeveloped resources in eastern Australia. High costs and weak prices have until now held back such projects, but a rising local market amid worries about the shortage has companies looking anew at high-cost developments.
Reporting by Sonali Paul; Editing by Tom Hogue