Royal Dutch Shell and PetroChina are considering feeding gas resources from their Arrow Energy venture into rival liquefied natural gas projects, in the first sign of long-awaited consolidation in Queensland's $70 billion coal seam gas sector.

Shell chief financial officer Simon Henry said it had held exploratory talks with its three competitors in Queensland about diverting some of its reserves into other LNG facilities.

"In the ramp up of the upstream [drilling] production phase, there have been and are ongoing discussions with partners as to whether gas can potentially be taken from one producer through other people's facilities," Mr Henry said last night.

"It may be possible to do this and from our perspective if there is a deal there to be done, we will do the deal and if not we will move on and keep the gas until we have our own LNG conversion capability."

Projects under construction in Gladstone include the QGC project, owned by Britain's BG Group, worth $20 billion, Santos's $16 billion Gladstone LNG development, and the Origin Energy/ConocoPhillips $14 billion Australia Pacific LNG facility. Shell and PetroChina have also laid out plans for a fourth venture in the Queensland port town.

Arrow Energy lags Queensland's three under construction projects, with a final investment decision on whether to proceed with its project not due until late 2013.

Resources Minister Martin Fergusonhas stated his preference for consolidation in the nascent sector but rival promoters have until this point rejected the prospect of pooling their gas resources.

In Western Australia, ventures such as ExxonMobil's and BHP Billiton's Scarborough project and Hess corporation's Equus project are considering selling their gas to an existing LNG venture instead of building their own infrastructure.

During a conference call to discuss Shell's first quarter results, Mr Henry said Shell might look for further bolt-on acquisitions to strengthen its reserves of coal seam gas.

Arrow spent $535 million buying CSG explorer Bow Energy and said while it had sufficient resources to feed its initial phase of 8 million tonnes a year of LNG, it would consider other opportunities.

Mr Henry said the domestic gas market was not the economic driver in Australia. "It's about the export market," he said.

Analysts estimate the first phase will cost at least $US20 billion, on par with the similar Australia Pacific LNG venture by Origin Energy, ConocoPhillips and Sinopec.

Shell said it continued to review the future of its Geelong refinery after closing its 79,000-barrel-a-day Clyde unit last year.

Mr Henry said it was difficult to give assurances about the future of Geelong, which is "clearly an economic challenge and it depends day to day on the Asian refining market".

"It's certainly under review but we are considering our refining capacity around the world, depending on the supply and demand balance."

Copyright 2012 Fairfax Media Publications Pty. Limited. All Rights Reserved.