Arrow could go ahead but in a different way, Mayor says

GLADSTONE'S Mayor says talks with Arrow Energy show the company is consolidating but hasn't stopped proceeding with its $10 billion LNG project.

There is much speculation about the future of the project after hundreds of Royal Dutch Shell Arrow Energy coal seam gas workers were given the boot following the parent company's shock profit downgrade and announcement it was selling its 8.9% interest in the Wheatstone LNG project in Western Australia.

Arrow project on shaky ground as Shell sells WA LNG stake

Gladstone Regional Mayor Gail Sellers said there had been no announcements made, but through conversations she had with Arrow staff on Monday, while Arrow was making people redundant, there was no talk of not proceeding with the project at Curtis Island.

"I asked about that and they said at this stage they're going to have time to look at the world market and what's going on here, but at this stage all I can really say is the plant has not been stopped," she said.

But she added it was likely the project would go forward in an alternate way.

An Arrow spokesperson confirmed media reports that about 400 staff out of 1200 would be made redundant as the company consolidated its plans in Gladstone.

Shell chief executive officer Ben van Beurden said Shell would remain a major player in Australia's energy industry, but it was "refocusing our investment to where we can add the most value".

The Australian reports that rather than selling the project and crystallising a loss, industry watchers see the most likely option for project owners Shell and PetroChina as biding their time.

This is something energy majors have been known to do for decades if development of major resources does not stack up.

In November Shell's head of gas Maarten Wetselaar confirmed the company's lack of confidence in the resource but rejected the possibility Shell would exit the project.

"There's still a big gas resource out there and it will be developed, but it requires a level of confidence we don't have today," Mr Wetselaar said.

Morgan Stanley analyst Stuart Baker said if the LNG plant's economics were unattractive at a time when prices were at record highs, it was hard to see collaboration and infrastructure-sharing making a huge difference. 

Arrow Energy

  • 50% Shell-owned
  • 50% PetroChina -owned
  • It cost the owners $3.5 billion in 2010
  • EIS approval was given last year
  • Now announcing 400 redundancies, from 1200 positions
  • Downsizing Brisbane offices