Shell May Spend $50 Billion in Australia Over 10 Years Amid Shift to Gas

Royal Dutch Shell Plc plans to spend as much as $50 billion in Australia over the next decade, more than in any other region, as Europe’s largest oil company continues a shift to gas production.

“The stars have aligned for Australia” because of improving technologies and increasing demand in Asia for cleaner-burning fuel, Ann Pickard, Shell Australia’s chairman and executive vice president for exploration and production, said in an interview in Brisbane today.

By 2012, more than 50 percent of Shell’s production will come from gas, said Pickard, who took charge of the company’s Australian operations in March after five years with Shell in Nigeria. Shell is among energy companies planning more than a dozen liquefied natural gas projects in Australia targeting Asia.

In a joint transaction with PetroChina Co., Shell agreed in March to acquire Arrow Energy Ltd. for A$3.5 billion ($3.1 billion), giving it reserves to feed an LNG venture in Queensland state. Shell is a partner in the A$43 billion Gorgon project led by Chevron Corp. and is advancing with plans to pioneer the use of floating LNG technology.

That’s “only the beginning” for Shell in Australia, Sydney-based Goldman Sachs & Partners Australia Pty analyst Aiden Bradley said in a report last month. Shell may partner with Santos Ltd. in developing LNG in Queensland, sell refining assets and “re-evaluate” its 34 percent interest in Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer, he said.

Floating LNG

Shell may spend between $30 billion and $50 billion in Australia in the next decade, Pickard said.

The Hague-based company, which employs about 2,500 people in Australia, may plan more floating LNG projects after the Prelude and Sunrise ventures, Pickard said in May.

Representatives of Shell and PetroChina met in Brisbane today for a ceremony with Queensland Premier Anna Bligh to mark the close of the Arrow acquisition. The companies aim to make a final investment decision on the Queensland LNG project by 2012, Ge Aiji, PetroChina’s project manager, said in an interview.

PetroChina expects strong “long term” demand for Australian LNG, Ge said. “It’s a booming economy and more and more dirty energy is being replaced by clean energy. There is a need.”

Andrew Faulkner, who is set to become chief executive officer of Arrow Energy when the transaction is completed on Aug. 23, said in an interview that he doesn’t see the development of the coal-seam gas-to-LNG venture as a race. “I still see us as part of the peloton, but I’m not racing to be first past the post,” he said. “There are more benefits to getting it right.”

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

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