The SMH reports that Exxon is pushing for a floating LNG platform for the Scarborough gas field offshore from Western Australia - Exxon for floating gas.

ExxonMobil insists a floating liquefied natural gas processor is the preferred way to develop the big Scarborough offshore gas project in Western Australia, despite its partner BHP Billiton talking up an alternative model.

ExxonMobil has approval from the government to develop the project using a floating processor, but that did not stop BHP's petroleum chief Tim Cutt suggesting last month that connection to an existing gas processing plant may be preferable. ''Developed capacity … is typically a more cost-effective and value-accretive way to go,'' Mr Cutt said.

The North West Shelf, which is partly owned by BHP, looms as the logical place to process Scarborough gas if the floating option is abandoned, given its proximity and the fact gas production at the shelf will soon plateau.

On the other side of the country it looks unlikely that the Arrow Energy coal seam gas LNG plant will go ahead - Struggling Shell defers Arrow LNG project again.

Royal Dutch Shell has ruled out any commitment this year to the development of its Arrow liquefied natural gas venture in Queensland and signalled a more rigorous approach to other new projects in Australia, where it is also considering big asset sales. ...

Speaking after Shell reported a 70 per cent slump in fourth-quarter profit, the company's new global head named the $20-billion-plus Arrow LNG venture with PetroChina among the next potential wave of LNG investments for the oil giant, alongside the Browse floating venture and others. But he said Shell had deferred the project, deterred by ''the economics and inflation risks''. The delay is the second for the struggling Arrow venture, where at least 250 jobs were cut in January.

Speculation is increasing that Shell and PetroChina will sell their gas to one of the three LNG plants being built in Queensland, either for an expansion, or to supplement initial inadequate supplies.

The SMH reports the coal seam gas industry has hit a spot of turbulence after a well blow out in Queensland - Blow-out at well fuels concerns over coal seam gas.

THE safety reputation of the gas sector has taken a battering after a well blew out in Queensland and a dangerous ''planking'' act was carried out on top of a 60-metre gas flare tower in South Australia.

The sacking of two Santos workers who carried out the prank on top of the Whyalla flare tower was overshadowed yesterday when a gas well operated by Shell and PetroChina blew out for reasons that are uncertain. The blow-out was triggered when workers tried to install a pump and created a pressurised spout of water and gas which spewed for more than 24 hours until it was plugged.

The farmer who owns the land around the well said it was the fourth gas-related incident on the property in five years, denting efforts by the gas sector to build confidence in the controversial practice of tapping coal seam gas.

Rival coal seam gas operators were seething over the potential damage to the sector's image and the Queensland Premier, Anna Bligh, said the joint venture company - Arrow Energy - would be subject to a ''thorough investigation''.

Coal seam gas has prompted concern among farmers over land access and water quality issues and environmentalists are worried about the pumping of chemicals into wells and aquifers. A theatre company in Queensland has been subjected to a boycott campaign because it accepted sponsorship from the gas company QGC.

OIL and gas producer Woodside Petroleum is a step closer to its goal of expanding the $14 billion Pluto project, after discovering more gas off Western Australia.

Analysts were speculating last night that Woodside may now have enough gas to push ahead with a second processing train at Pluto, after it announced success in its Xeres well in the Carnarvon Basin. The Xeres well and the nearby Martin well have long been touted as holding the key to Woodside's expansion hopes, and yesterday's announcement revealed the company had intersected 51 metres of gross gas within the triassic target at Xeres.

The well depth exceeded three kilometres and the discovery had been confirmed by several methods, including with the recovery of gas samples to the surface. The discovery is the seventh in the region and comes after 100 metres of gross gas was discovered at the Martin field in March.

Citi analyst Mark Greenwood said the Xeres find was relatively small, but might be enough to get the second stage of Pluto over the line. ''I think they've probably got enough gas,'' he said. ''They've been aiming to get about 3 trillion cubic feet of gas or more. ''They've made seven discoveries, so each of these discoveries have been pretty small and this one might get them to the threshold or slightly above the threshold.''

The SMH reports that coal seam gas company Arrow Energy has accepted Shell and PetroChina's bid for the company - Arrow backs sweetened bid.

Arrow Energy has recommended its shareholders accept a new, improved joint takeover bid from Royal Dutch Shell and PetroChina.

Shell and PetroChina lifted their offer to $4.70 a share in cash for Arrow's Australian assets plus one share in a new listed entity to be called Dart Energy, which will house the group's Asian exploration assets and some Australian assets, Arrow said this morning. ...

Dart Energy will comprise of 90 per cent of Arrow’s interest in Arrow Energy International, which holds the existing portfolio of international assets in China, India, Vietnam and Indonesia, Arrow said. It will also include come Arrow Energy stakes in companies listed on the Australian Securities Exchange.

Farm-in rights into Apollo Gas’s licences in NSW will also be part of Dart Energy, as will $45 million cash, a $US25 million ($27.3 million) loan facility from Shell and ‘‘co-operation with PetroChina in relation to future coal seam gas opportunities in China’’.

The FT has an article on a joint Shell / Chinese takeover bid for Queensland CSG producer Arrow Energy (I was pleased to see they included a link to my old coal seam gas post - I haven't seen many incoming links from the mainstream media lately - unsurprisingly given the scarcity of original content here lately) - Shell, PetroChina and Arrow: the next big resources grab.

One potential glitch, however, might be the sensitivities Down Under about China’s growing interest in buying up Australian natural resources companies. Although all has been relatively quiet recently, the reverberations from a string of deals - successful and otherwise – last year are still being felt.

Not only does the offer highlight the push by Shell and PetroChina to dominate Australia’s coal-bed methane gas sector. It also puts the focus on Australia’s emergence as a leader in unconventional gas – even as analysts predict a wave of consolidation in the sector amid too many competing projects.

Even so, as the FT notes in a separate analysis, the boom in the domestic US shale gas industry – another form of unconventional gas – comes just as Australia is set to secure its path to becoming the world’s biggest exporter of unconventional gas.

The Australian reports that Chevron are continuing their run of success selling LNG from the north west shelf - Chevron signs $18bn North West Shelf natural gas deal with Japanese utility.

US oil major Chevron continues to pull in more deals and equity partners in its two big West Australian liquefied natural gas projects, announcing it has agreed to sell LNG potentially worth $18 billion to Japan's Kyushu Electric over the next 20 years in two separate deals.

The two heads of agreements announced yesterday come as Queensland's LNG hopefuls, who want to export coal seam gas through Gladstone, have struggled to lock in buyers for projects they hope to approve this year.

Chevron says Kyushu has agreed to buy 300,000 tonnes of LNG a year for 15 years from the recently started $43bn Gorgon project on Barrow Island.

The power utility also agreed to take 700,000 tonnes of LNG a year for 20 years from the yet-to-be approved Wheatstone project planned for Onslow.

"The agreements with Kyushu Electric further demonstrate our ability to attract large and experienced LNG buyers as we develop these two legacy gas projects in Australia," Chevron Asia-Pacific exploration and production president Jim Blackwell said

On top of the gas sales, Kyushu, which is a customer of the Woodside-operated North West Shelf LNG plant, has agreed to take an equity stake in Wheatstone.

Australian coal seam gas firm Arrow Energy Ltd (AOE.AX) sharply raised its gas reserves and said that the increase would help boost its ability to supply gas to more liquefied natural gas (LNG) projects.

Arrow, a coal seam gas supplier of Royal Dutch Shell (RDSa.L) in Australia, said it may be able to add up to 1.5 trillion cubic feet (tcf) of gas reserves per year to its gross proved and probable (2P) reserves over the next three years, up from an earlier goal of 1 tcf per year.

The firm's 2P reserves, defined by the industry as having 50 percent chance of recovery, jumped by 50.3 percent from a year ago to 6,150 petajoules (PJ), while reserves by the widest estimate increased by 18.6 percent to 11,042 PJ.

"This acceleration of reserves additions will ensure that we are well placed for future commitments to further growth opportunities in the domestic market, the Fisherman's Landing project or (Shell's proposed) Curtis Island," Arrow's Managing Director Nick Davies said in a statement.

Total uncontracted 2P gas reserves from its operated tenements now stand at 5,379 PJ, the firm said.

The Australian has a report on further increases in coal seam gas reserves in Australia - Arrow Energy gas reserves more than double.

ARROW Energy's chief executive expects the company to continue to deliver reserve upgrades and said it has the capability to supply both the Fishermans Landing and Curtis Island liquefied natural gas plants in Queensland.

The Sydney-based group said it has more than doubled its proven and probable reserves, or 2P, gas reserves to 2,581 petajoules. "This is a huge reserves increase but there is much more to come - we have barely scratched the surface and we have much more to do," chief executive Nick Davies said.

Arrow's current 2P reserves are about a quarter of the size of those of Woodside Petroleum's, Mr Davies said, and these reserves have come from only one 10th of Arrow's coal seam methane land. ... Arrow said today the 2,581 2P petajoules of coal seam gas at June 30, was up 119 per cent from 1,177 PJ at December 31. The company's net proven, probable and possible reserves now stand at 5,412 PJ, Arrow said.

Bloomberg reports that consolidation of LNG projects using coal seam gas in Australia is likely in the near future - Shell Partner Sees Australian Project Consolidation.

Australia’s emerging coal-seam gas industry is headed for consolidation as rivals seek the most profitable way of developing ventures that liquefy the fuel for export, Royal Dutch Shell Plc’s local partner said.

Shell and Arrow Energy Ltd. expect to announce this quarter or next how they intend to participate in the reorganization of rival projects planned by companies including BG Group Plc and ConocoPhillips, said Shaun Scott, chief executive officer of Brisbane-based Arrow’s Australian unit.

Growth in non-conventional gas such as coal-seam methane and shale gas will help it overtake coal as the “dominant” fuel in the next few years, Schlumberger Ltd., the world’s largest oilfield services provider, said in October. Shell last year agreed to buy 30 percent of the Australian permit areas of Arrow, which has an accord to sell fuel for a small LNG project planned by Liquefied Natural Gas Ltd.

Corporate consolidation in the coal-seam gas industry is “broadly finished” and companies are now moving toward “a project consolidation phase,” Scott told reporters in Brisbane today. “Everyone sees that as an inevitable process.”

The SMH has an update on the coal seam gas industry, particularly rumours that Arrow Energy is in play - Arrow Energy says it is geared up for growth, not takeover. More at The Australian - Shell on the outer in Queensland gas deal.

MUCH like its line of business, the coal seam gas producer Arrow Energy came from relative obscurity last year.

In June the Queensland company signed a $776 million deal with the global giant Shell to supply gas to one of several projects looking to export the fuel to Asia. They plan to supply a plant operated by LNG Ltd, which will then export 1.5 million tonnes of liquefied natural gas a year by 2011-12. This amount is about half of Queensland's yearly gas consumption, and the companies plan to double output after the plant begins production.

To show it is serious, Arrow recently unveiled a $673 million takeover bid for the explorer Pure Energy Resources, in a move which should supply enough gas to meet the LNG target. The project is the smallest of four competing efforts to export coal seam gas from the region, which have attracted about $15 billion in commitments from global oil companies this year.

Considering this, and that Shell normally sets its sights on bigger deals, Arrow seems a possible target for a wave of consolidation in the industry as players look to cut costs. But the chief executive of Arrow's Australian operations, Shaun Scott, denies the company is preparing to put itself up for sale. Instead, he said the wave of deal-making in the sector was likely to dry up this year. "Fundamentally, the transactions that could have happened have now happened," he told the Herald.

After its bid for Pure Energy, Arrow is the only large coal seam gas specialist left in Queensland, and its NSW rivals are several years behind in proving their reserves. Other possible targets, such as Sunshine Gas and Roma Petroleum, were bought by Queensland Gas - which is owned by BG Group of Britain.

Rather than more takeovers, Mr Scott said the next step for the sector was project-level consolidation, as the complex business of building the multibillion-dollar plants began. Companies are already talking to each other informally in an effort to avoid a squabble over resources and labour.

"Logistically, everyone trying to build their own LNG project at the same location and the same time is going to create some challenges," Mr Scott said. "Everyone is trying to make sure that their own project … is as strong as possible, so that when those discussions really do begin in earnest as everyone's expecting, you'll be in the strongest position."

Analysts say the vast resources and technical skill required for building LNG plants will cause Queensland LNG rivals to seek merger opportunities. Another risk is the price of oil, which broadly sets the price of LNG. It was racing towards $US150 a barrel when the flurry of deals were signed in the first half of last year, but is now hovering around $US40. The long-term floor for exporting LNG project is about $US40, so it is fair to assume the companies that put Australian coal seam gas on the world stage will be watching on nervously.

"Yes, we're at the bottom of the cycle, and it's been a particularly nasty one," Mr Scott said. But he is confident oil prices will pick up, and he points out that the futures market is pricing oil at about $US70 a barrel in 2012.