Shell, PetroChina’s Arrow Energy losses hit $10bn

Speculation is growing over the appetite of PetroChina to keep ploughing money into the venture, given the massive losses since 2010.

Energy giants Shell and PetroChina have seen losses on their Arrow Energy joint venture top $10bn since it was formed in 2010 after posting a further $307m loss in 2022 despite booming oil and gas prices.

Speculation has been growing over the appetite of PetroChina to keep ploughing money into the venture given the massive losses sustained in the last decade.

Arrow signed off in 2020 on an initial $2bn first stage for a broader $10bn Surat coal-seam gas project which plans to bring an extra 5000 petajoules of gas to the market over the next 27 years.

As part of its 2022 financial report filed with ASIC, the Arrow venture said “subsequent phases of the Surat development are being reviewed by shareholders as they continue to move through approval stages”.

Arrow recorded a $307m loss in 2022 with hefty foreign exchange and finance costs weighing on its performance.

Losses since the Arrow venture was formed in 2010 have now reached $10.1bn or around $14.5bn when combined with $4.4bn of acquisition costs including the $3.5bn paid by the two energy producers to acquire Arrow a decade ago.

Some $2.1bn of loans from Shell and PetroChina were recorded in the 2022 financial year. That followed a move by Shell and PetroChina the previous year to convert $US1.26bn of loans taken out in 2012 and 2013 into $1.75bn of equity in Arrow after the loans were due for repayment during the year.

The development of Arrow’s gas resources remains important to feed Shell’s QGC export plant in Queensland’s Gladstone.

The QGC venture will buy supplies from Arrow to feed both its Queensland LNG export plant in Gladstone along with industrial users on the nation’s east coast.

The initial $2bn Surat phase will add 100 petajoules of gas annually from 2021 at peak production, equating to 16 per cent of total east coast demand.

The broader $10bn project will run until 2047, with Arrow staggering the drilling of 2500 wells through three phases that all require separate investment decisions by Shell and PetroChina.

Gas will be piped to the QCLNG export project in Gladstone owned by Shell, China’s CNOOC and Tokyo Gas. Shell bought into Arrow Energy in 2008 and two years later took over the whole company in a 50-50 joint venture with PetroChina.

The Queensland producer said it will continue the Surat project in the 2023 financial year with the Harry tranche scheduled to be drilled in the first half of 2023.

Shell in March promoted Arrow Energy boss Cecile Wake to become the multinational’s new Australian chair, and incumbent Tony Nunan is heading to London for a role as chief of staff to global chief executive Wael Sawan.

Ms Wake endured a testing time at Arrow navigating landholders in Queensland. Last year the state’s GasFields Commission called on all stakeholders to “urgently act’’ to resolve their differences over the $10 billion Surat gas project near Dalby on the western Darling Downs.

Current Shell Australia East boss Godson Njoku has succeeded Ms Wake as chief executive of Arrow Energy.