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Shell (SHEL), PetroChina Surat Gas Project Expansion Underway

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London-based energy giant Shell plc (SHEL - Free Report) and Asian behemoth PetroChina’s ongoing expansion of the Surat Gas Project (“SGP”) marks a significant step in enhancing their liquefied natural gas (“LNG”) production capacity.

Surat Gas Project: Things to Know

As partners in the Arrow Energy joint venture, the two companies are committing to phase two of this ambitious Australian development, set to produce 130 million cubic feet per day at peak. By 2026, gas from SGP North will supply Shell’s Queensland Curtis LNG (“QCLNG”) facility on Curtis Island, a strategic hub for LNG exports and a critical asset in meeting both domestic and international gas demands.

Located in Queensland’s Surat Basin, the SGP taps into vast coal seam gas reserves estimated at five trillion cubic feet. The first phase, sanctioned in 2020, established over 600 production wells, while phase two aims to add 450 more. This will bolster Shell's long-term contracts, underpinned by a 27-year gas sales agreement. Arrow Energy's reliance on existing infrastructure minimizes disruption, ensuring that the project's environmental footprint remains relatively small, while maximizing production efficiency.

Shell’s LNG Prowess

This development aligns with Shell’s broader strategy to expand its LNG business by 20-30% by 2030, building on the Zacks Rank #3 (Hold) company's existing capacity at QCLNG, which supplied 15% of eastern Australia’s gas in 2023. As global LNG demand rises — particularly in Asia, where industries are transitioning from coal to cleaner energy sources — Shell and PetroChina’s expanded presence in the Surat Basin positions them to capture value from this shift. For investors, this phased expansion represents a calculated push toward a more sustainable energy future while enhancing returns for Shell’s integrated gas business.

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Investors should know that Shell’s long-term strategy revolves around LNG. This London-based firm bought BG Group for $50 billion in 2016 to become the world’s largest producer and shipper of LNG. With LNG export demand likely to rise significantly in the near-to-medium term, Shell’s position as a major supplier of LNG should help the company meet the fuel’s growing demand and help cash flow to improve.

Other Key LNG Players

In addition to Shell, leading U.S. LNG exporters include Cheniere Energy (LNG - Free Report) and Chevron (CVX - Free Report) . These companies are also well-positioned to capitalize on the growing global demand for LNG.

Cheniere Energy: Being the first company to receive regulatory approval to export LNG from its 2.6 billion cubic feet per day Sabine Pass terminal, Cheniere Energy certainly enjoys a distinct competitive advantage. The Zacks Rank #3 (Hold) company is primed for significant revenue and earnings growth on the back of solid operations and long-term contracts. Cheniere Energy’s gas supply deals for its Sabine Pass and Corpus Christi projects offer excellent cash flow visibility in the coming years.

Chevron: Chevron is another world-class operator of LNG. The giant Gorgon and Wheatstone developments in Australia are part of Chevron’s long-term strategy and are also its flagship LNG developments. These mega projects allow the supermajor to tap into the strong Asian LNG demand. Chevron is the operator of both projects — with a stake of 64.14% in Wheatstone and 47.3% in the Gorgon development.


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