May 1, 2017 / 4:01 AM / 3 months ago

Arrow Energy wins Australian gas pipeline license, but plan on hold

3 Min Read

MELBOURNE (Reuters) - Arrow Energy, owned by Royal Dutch Shell (RDSa.L) and PetroChina (601857.SS), has been granted a license to build a natural gas pipeline in Australia's Queensland state that could contribute to easing the country's gas supply crunch.

Queensland issued the pipeline license last Friday, a spokesman for the state's Department of Natural Resources and Mines said on Monday.

The 420-km (260-mile) pipeline is designed to carry gas from a coal seam gas project in Queensland's Bowen Basin to the Gladstone area. There has been no final decision yet on the pipeline because the coal seam project has not been developed.

Arrow is working on overcoming challenges with coal seam gas production in the Bowen Basin and does not know what impact that will have on the overall project's schedule, an Arrow spokeswoman said.

The Bowen project was originally going to supply a liquefied natural gas (LNG) export project, which would have been the fourth on Queensland's east coast, but Shell and PetroChina shelved that plan more than two years ago.

Instead, Arrow's gas could help ease a looming gas shortfall in Australia's eastern market by supplying rival LNG projects, which have been blamed for taking gas out of the domestic market to help meet export contracts.

Higher gas demand from the three LNG plants in Queensland have stoked a rise in local gas and power prices and led Australia's energy market operator to warn of a looming gas shortfall within the next two years, alarming miners and manufacturers.

To help avert a shortage, the government last week announced a radical plan to limit LNG exports from Queensland.

Commodities giant Glencore Plc (GLEN.L), which has a copper refinery and smelter in the state that are some of the company's most energy-consuming operations, warned on Monday it may hold back on future investments due to high energy costs.

"If electricity prices continue to rise, Glencore will be forced to consider the future of our copper processing assets across North Queensland," Glencore's chief operating officer for copper in Australia, Mike Westerman, told Prime Minister Malcolm Turnbull on a visit to its Townsville refinery.

Reporting by Sonali Paul; Additional reporting by James Regan in Sydney; Editing by Christian Schmollinger

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