On successful completion of the acquisition, the joint venture will own Arrow’s Queensland CSG assets and domestic power business as well as Shell’s Queensland CSG assets and its site for a proposed liquefied natural gas (LNG) plant on Curtis Island at Gladstone.

Shell and PetroChina say that they bring technical capabilities, capital backing, major project experience and LNG marketing ability which will facilitate the growth of Queensland’s CSG and LNG industry, and help to further develop Australia’s LNG sector.

The CSG to LNG project to be developed by the joint venture is an extremely exciting project and Shell’s and PetroChina’s technical and financial capabilities will underpin the next phase of this significant development.

—Qiliang Bo, Vice President of PetroChina Company Limited

Coal seam gas is a form of natural gas trapped in coal beds by water and ground pressure. Coal seam gas refers to the methane gas lining the open fractures between the coal (the cleats) and the inside of pores within the coal (the matrix).

To produce the gas, Arrow drills a well 300-500 meters deep, then cases the upper portion with steel and cement. A rotating blade is lowered to the bottom section of the well to ream out cavities in the coal seams. This production zone is then lined with alternating perforated and blank steel casing.

Water, released from the coal, is pumped from the well using a rotating screw. This lowers the water pressure in the coal seam and allows the gas to separate from the coal and flow into the well.

The gas and water rise to the surface through separate pipes. The water is transported through underground pipes to a dam for possible reuse and recycling. The gas passes through a separator near the well head to remove water traces before being piped to a processing facility to be compressed and dehydrated. The gas is then fed into commercial pipelines.

Arrow is expected to hold a shareholder meeting mid July 2010 to allow shareholders to vote on the offer.