June 2 (Bloomberg) -- Royal Dutch Shell Plc, Europe's largest oil company, and Australia's Arrow Energy Ltd. signed an initial accord for a $700 million venture to extract natural gas from coal seams to tap rising demand for cleaner-burning fuels.
Under the accord, Shell would buy a 30 percent stake in Arrow's coal seam gas acreage in Queensland state, and a 10 percent interest in the Brisbane-based company's international unit, Shell said today in an e-mailed statement. It would have the right to negotiate to buy any liquefied natural gas produced from the ventures. Arrow shares jumped to a record in Sydney.
The agreement follows last week's accord by Malaysia's Petroliam Nasional Bhd. to pay $2.51 billion for a stake in a rival Australian project led by Santos Ltd. proposing to use coal seam gas to produce LNG, the fastest-growing energy market. Shell was probably among the list of potential partners for the Santos project, JPMorgan Chase & Co. said April 9.
``This very obviously provides credibility for Arrow's projects,'' said Andrew Pedler, senior energy analyst at Wilson HTM Investment Group in Brisbane. ``It is directioned both domestically and internationally, just by the character and nature of Shell.''
Arrow Energy gained as much as 78 cents, or 23 percent, to A$4.11 in Sydney trading. The stock was at A$3.88 on the Australian stock exchange at 10:53 a.m. local time. Liquefied Natural Gas Ltd., Arrow's existing partner for an LNG project in Queensland state, advanced as much as 11 percent
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