Gas Operator Arrow Energy Faces Shutdown

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International companies have expressed interest in investing AU$70 billion in Queensland’s large coal seam gas reserves. (Photo: www.garrisonphoto.org/sxc)
International companies have expressed interest in investing AU$70 billion in Queensland’s large coal seam gas reserves. (Photo: www.garrisonphoto.org/sxc)

BUSINESS

  • Coal seam gas operator Arrow Energy is threatened with closure after well erupts
  • Incident marks the fourth gas-related accident on the site in under five years
  • Despite concerns, new coal seam gas projects have been approved; must comply with stringent environmental restrictions and safety conditions

One of the biggest coal seam gas operators in northeast Australia risks being shut down following an eruption on Sunday morning.

The Queensland state government asked for an explanation as to how the Arrow Energy facility in the Darling Downs region blew out during the installation of a pump.

Gas and water was pumped as high as 90 meters into the air “with increasing intensity” and continued for over 24 hours. Engineers from joint venture partners Royal Dutch Shell and PetroChina eventually capped the well with dense soil-based drilling liquids. No personnel were injured in the blow-out or the plugging process.

The nearest residential building was some 5 km northeast of the site, which was closed off while government authorities began investigations as to how the incident happened.

Fourth Accident

It is the fourth gas-related accident on the site in under five years, according to the farmer who owns the surrounding land.

Coal seam gas is a form of natural gas, around 80% methane. Advocates market it as an alternative fuel that will help in the transition to renewable energy as coal is phased out. The extraction process both uses and produces water, meaning the coal seam gas industry is not subject to the same water restrictions as farmers.

Farmers with properties neighboring coal seam gas installations have raised concerns over land access and the quality of water, while environmentalists have voiced their worries about the practice of pumping chemicals into wells.

This accident is the latest stumbling block for the gas sector, as it tries to build confidence in the controversial practice of tapping coal seam gas.

New Projects Approved

Despite concerns from farmers and environmentalists, the state and federal government recently approved a number of coal seam gas projects, with partners including BG Group and local oil and gas company Santos Ltd. However, stringent environmental restrictions and safety conditions have been imposed on the operators.

International companies have also expressed interest in investing AU$70 billion in developing Queensland’s large coal seam gas reserves, which would be processed for export at four large-scale liquefied natural gas (LNG) facilities at Gladstone Port near Rockhampton, around 500 km north of Darling Downs.

Shell and PetroChina are still awaiting approval from state and federal lawmakers. The joint venture with Arrow aims to secure approval for the construction of the LNG project at Gladstone by early 2013, with plans to begin exporting from late 2016.

Key Players – Australia Oil and Gas Industry

  • BHP Billiton Limited, Santos Ltd, Woodside Petroleum Ltd, ExxonMobil Australia Pty Ltd, Shell Energy Holdings Australia Limited, PetroChina

Key Statistics - Australia Onshore Gas Industry (source: Datamonitor)

  • From 2000-2009, Australia’s onshore oil and gas production fell at a rate of 1.4% annually.
  • Production levels are expected to increase at an annual rate of 4.1% from 2009 through 2030.
  • Onshore Capital Expenditure (Capex) made up 78% of total onshore expenditure in 2009, with Operational Expenditure (Opex) accounting for the remaining 22%.

By James Mulholland for
James Mulholland is a Paris-based internet and broadcast journalist specializing in sports, current affairs and technology news, while also freelancing as a photographer.

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