Business

Oil price too low to see return for Origin Energy plant

AUSTRALIA Pacific LNG's first shipment of liquefied natural gas on Saturday was exported into a market where the low oil prices mean Origin Energy won't even cover the operational and financing costs for the plant.

According to Origin's 2015 annual report, the company requires the oil price to be around $55 a barrel to receive a cash flow distribution from APLNG but the prices finished below that on Friday at $47.29.

If oil is at $100 a barrel, Origin expects to make $900 million in cash flow per year but with each drop of $10 that amount decreases by $200 million.

And the price continued to drop this week, finishing below $45 a barrel on Monday.

Origin Energy managing director Grant King was still positive when announcing the first shipment from APLNG though.

"This is a landmark moment in the history of Origin," he said as the project that cost the company $25 million and seven years to build exported gas for the first time.

"LNG plants have a long operational life and (APLNG) is expected to deliver a significant amount of earnings to Origin," he said.

In a move to protect the company from any potential further price drop, in December Origin brokered a deal for 2017 LNG shipments at a fixed price.

That is to sell 75% of shipments at $55 a barrel and the rest at $40 a barrel which would still see the company operating at a loss but does reduce risk.

"With the continued decline in oil prices, Origin has acted to reduce the potential requirement for the company to make additional contributions to (APLNG)," Mr King said.

He said if oil prices were at $28 a barrel the company would have to contribute around $200 million to APLNG.

Topics:  australia pacific, gladstone, lng, orgin energy




Stay Connected

Update your news preferences and get the latest news delivered to your inbox.

'All I heard when my baby cried was ‘you’re a terrible mum'

APN Hey Mummy Feature for online - stock images of Katie Dykes. Photo Marc Stapelberg / The Northern Star

KATIE'S battle with PND is not unlike many mothers.

'I just thought all mums got no sleep'

MELTOPIA battled PND with all four of her children.

4 survival tips for mummas heading back to work

The few reminders every working mum needs to read.

Health and nutrition with kids - how do you balance it?

HOW important is health and nutrition in your household?

Smack or no smack - where do you stand?

THE debate is reignited - is smacking acceptable?

Technology and kids: Do you ever cut their wi-fi?

Check out our new video series featuring mums having a chat

'Cruel': Family of 9 in Gladstone housing commission home

CROWDED HOUSE: Pa, Ma, Kelly, Lou, Chris, Lea-Ann, Patty, Nelson, Joey and Brendan squeeze together for a family picture.

“I’ve been in my house for 19 years and I know my rights”

YOUR GUIDE: Flynn candidates hand in their resumes

WHO is most qualified for Flynn's top job?

Latest deals and offers

Matthew Holmes and Indy

Matthew Holmes and Indy

Matthew Holmes and Indy

60th wedding anniversary

Leila and Pertti 'Peter' Kouivunen celebrated their 60th wedding anniversary this month.

Leila Koivunen has just celebrated her 60th wedding anniversary with husband...

Zac Beers on MEdicare

Labor held a rally on Dawson Hwy about more cuts to Medicare.

Burnett Heads housing development approved

COUNCIL APPROVED: A Burnett Heads housing development has been approved by Bundaberg Regional Council. Photo Contributed

Councillors approved the development seven votes to four

Three bedroom, 1100sqm block: Is this Qld's cheapest home?

BARGAIN BUY: Is this North Bundaberg property the cheapest home in Queensland?

Becoming a real estate mogul is all about risk and reward