The project is the biggest gas deal in Queensland since 2011 when the LNG projects won their approval. The first stage commitment is understood to cost about $2 billion.

It is also a significant boost for the Palaszczuk Government which is facing major unemployment issues in regional Queensland, which have worsened under the COVID-19 shutdown.

The project is on 16 petroleum leases covering about 2500 square kilometres on blocks between Dalby and Chinchilla and will mean the supply of 5000 petajoules of gas over 27 years, including about 270 terajoules a day during phase one’s peak production, towards a whole-of-project peak of 700TJ/day.

The gas will primarily go to Shell-QGC for domestic and export use and is one of four major gas developments in recent years which include Senex’s Atlas project. About a third of the gas will go to the domestic market.

The jobs will consist of about 800 construction roles and 200 in operations and follow a recent decision by Origin to cut up to $400 million from its capital projects in the CSG fields.

Arrow, a Brisbane-based company owned by Shell and PetroChina, has been negotiating binding land access compensation agreements with local landholders and involving them in its field development planning.

Arrow was the only major coal seam gas producer that didn’t build an LNG project on Curtis Island and the company said that allowed them to create a different strategy to get the gas to market.

Premier Annastacia Palaszczuk said the project would mark a milestone in Queensland’s economic recovery from COVID-19 and she expected boots on the ground by August.

“This is wonderful news, just what Queensland needs at this time. It’s a real shot in the arm that we all need,” she said.

“We have made very encouraging progress in managing the health impacts of this pandemic.

“But it’s projects like this – and the more than 1000 jobs it will generate – that will help us to our economic recovery.”

Mines Minister Dr Anthony Lynham said the commitment would mean an almost immediate start to the project as well as major opportunities for local suppliers.

“The project, over all phases, will create up to 800 construction jobs and 200 permanent, operations jobs – Queensland’s largest gas project to start since 2011.”

Construction is expected to start later this year, with first gas forecast to flow from 2021.

Arrow chief executive Cecile Wake praised the Queensland Government’s role and said the project needed a complex and innovative suite of commercial collaboration arrangements to bring to market one of this state’s great natural resources.

“Now it is down to Arrow to safely and successfully deliver this project, which will bring extra gas to market domestically and internationally, and extra jobs regionally,” Wake said.

“Arrow has been part of southern Queensland’s economy for 20 years now, with a local workforce that predominantly lives in the region, raises their families there and spends their incomes there.

“Today’s announcement means continued work for them, and employment for the other workers that will be needed for the Surat Gas Project.”

Queensland’s most recent major gas project to start production has been Senex Energy’s domestic-only Project Atlas near Wandoan and Miles.

Shell’s integrated gas and new energies director Maarten Wetselaar said the use of QGC’s existing upstream pipelines and treatment facilities would reduce development costs, making the project competitive and economically attractive.

“The Arrow joint venture partners’ decision not to build another two trains on Curtis Island provided the opportunity to create this alternative pathway to market for the resource. The approach we have taken to this investment is aligned with Shell’s focus on actively managing all operational and financial levers to deliver sustainable cash flow generation. It reflects our disciplined approach to capital spend, which takes a long-term view of the fundamentals of supply and demand.”