News

Thin profit margin for APLNG gas plant

TUMBLING oil prices and the pending influx of gas onto the world market have created doubt the $80 billion invested in the Curtis Island gas plants was money well spent.

But that's not the view of Origin Energy Chief Executive Officer David Baldwin whose company owns a 37.5% stake in APLNG, which is the last of the three plants to start exporting.

Mr Baldwin admits there are challenges ahead, but says the low oil price has pushed the company to re-think how it works; starting with the Surat and Bowen basin gas fields where innovation has already seen production costs drop by almost $2 million per well.

The company's first train is fed by 980 wells which 12 months ago cost $4.5 million each to build. Now that cost is down to $2.7 million per well and Origin is pushing to go as low as $2 million in the coming months, Mr Baldwin explained.

PHOTOS: Rare glimpse at APLNG's site

It's a significant saving given APLNG is expected to build 300 more wells this year. The materials to build each well comes in a kit with prefabricated parts, but with pressure to cut costs, engineers have begun questioning the way they're built.

"For example, the pipe coming from the well which joins the main gas pipe comes curved," Mr Baldwin said.

"We've asked why? If the whole well is turned, then it can be a straight pipe which costs less money to produce."

Mr Baldwin said it was that type of innovation that would help make APLNG profitable in the long term. The cost cutting was essential because APLNG based its original business plan off an average oil price of US$65 a barrel.

As of Thursday afternoon, oil is at US$36 a barrel and isn't expected to increase dramatically over the next 12 months.

At $40 a barrel the profit margin for APLNG is thin; it needs at least $35 per barrel to cover production costs and pay down the interest of its debt.

There are still about 600 workers on the APLNG site constructing the plant's second train which will be finished before the end of the year.

But bringing the second train online won't change the venture's business plan because APLNG has already signed a 20-year contract to export 4.3 million tonnes of gas each year and says it has no plans to increase that volume, or the capacity of the plant.

Already the on-shore gas industry is a major earner for Queensland's economy and last financial year represented 3%, or $10.6 billion, of the state's total gross product.

Follow this reporter on Twitter @helenspelitis

Did you know?

APLNG is a joint venture between Origin (37.5%), Concophillips (37.5%) and Sinopec (25%)

The plant exported its first shipment aboard the Methane Spirit in January. The ship can carry 165,000cu m of liquid gas.

Topics:  aplng, curtis island, gladstone, lng




'Lawless life': Gladstone body builder rips off servo

Dylan Todd / Facebook

GLADSTONE body builder drives off with fuel.

'Fast tracked': $9.8m project to bring Gladstone jobs

AN ENERGY HIT: Glenn Butcher MP has announced a $9.8 million upgrade to the power supply infrastructure.

State Government fast tracks another project in Gladstone

'Tough times': Facebook project gives Gladstone locals gifts

ACT OF KINDNESS: Dan Gunter felt like it was his lucky day when he picked up one of the gifts from Gladstone Goodness Project while at Calliope cafe The Empty Plate.

GROUP with 'annonynous' admin to bring hope to Gladstone region.

Latest deals and offers

Taylor Swift dismissed from jury duty

Taylor Swift was dismissed from jury duty in a sexual assault case

Zumbo's Willy Wonka hat trick trips up Queensland brickie

Adriano Zumbo and Rachel Khoo with Zumbo's floating dessert in a scene from Zumbo's Just Desserts.

NOOSA'S Michael Basset asked to recreate floating chocolate dish.

John Lennon's killer denied parole for 9th time

John Lennon

John Lennon's killer has been denied parole for the ninth time.

Mexican band takes aim at Trump

Disguised as unhinged narcotraficantes, the Mexican-American agitators of BRUJERIA captured the mood of the citys minorities with the bands infamous and widely banned 1993 debut, Matando Geros (Killing White People), quickly becoming the Spanish-language counterparts to early grindcore masters TERRORIZER and NAPALM DEATH.  Photo Contributed

'Satanic drug lord' band challenges Trump

Willy Wonka star, Gene Wilder dead at 83

A still of Gene Wilder in the 1971 film Willy Wonka and the Chocolate Factory

Social media has already lit up with tributes to the late actor.

Gladstone couple's spontaneous Gympie Muster wedding

Craig Oglesby and Brenda Strong celebrate their wedding at the Gympie Muster with punters in front of the Main Stage.

The Gympie Music Muster was the perfect place for a wedding.

Bunnings starts demolition of historic foundry buildings

Demolition works have started at the Toowoomba Foundry.

Lane and footpath closures will take place

Australia's most expensive balcony and it hasn't been built

Viridian Noosa.

How Noosa millionares' squabble could affect body corporates

Palm Lake Resort set to move in to Coast with 276 villas

Palm Lake Group has been given approval by Sunshine Coast Council to build a 276-villa over 50s resort and 120-bed aged care facility at the intersection of Caloundra Rd and Caloundra Mooloolaba Rd in Little Mountain.

New facility planned for Caloundra Rd

Warning for unit investors with price plummet prediction

The warning signs are flashing for one real estate sector in 2017 despite others performing the best they have in years and it's not going to be pretty.

One real estate sector looks set for a rocky 2017

REVEALED: Pat Rafter's $18m Coast house on the market

Check out the photos of the Coast's most expensive property for sale

The "correction we had to have" in Gladstone's rentals

UPWARD MARCH: The rental vacancy rate in Gladstone has improved for the first time in more than a year, providing a confidence boost in the market.

Vacancy rates improve with signs that things are getting betterF