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Aiming the Arrow of coal seam gas

Royal Dutch Shell will pay $739 million to buy into Arrow Energy Ltd’s coal seam gas projects in Australia, China, Indonesia, Vietnam and India.

As exploration costs soar and access to conventional oil and gas reserves becomes more difficult, big energy companies are stepping up their search for new energy sources, such as coal bed methane, to feed roaring global demand.

Shell plans to acquire a 30% interest in Arrow’s coal seam gas holdings in Queensland for $644 million and pay up to $132 million for a 10% stake in Arrow International, a wholly owned subsidiary of Arrow Energy which holds Arrow’s international interests in coal seam gas opportunities.

The agreement also gives Shell a five-year option to acquire up to 50% of individual Arrow International projects, which includes activities in China.

“Arrow has proven CSG expertise, and extensive Australian and international CSG acreage positions,” said Chris Gunner, chief operating officer for Shell Development (Australia) Pty Ltd. “We look forward to working with Arrow and creating an alliance that should become a significant force in the development of CSG resources.”

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