Final decision on LNG investment

APLNG workers step onto Curtis Island. The project received final investment decision yesterday.

Contributed

ORIGIN Energy yesterday announced the final investment decision on its Australian Pacific LNG project (APLNG) on Curtis Island.

Origin Energy and ConocoPhilips have approved a funding phase of US$14 billion for initial investment in APLNG. The company expects the total cost for the two processing units, or trains, to be about US$20 billion.

APLNG project director Page Maxson told The Observer it was a big moment for the LNG proponent.

“It’s a key step,” he said of the final investment decision.

“It really unleashes it to go forward now.

“It puts us on a timetable, as much as anything.

"We’ve now committed to our shareholders that we will be (delivering LNG) by 2015.”

Mr Page said Origin’s partnership with ConocoPhilips, which has a 40-year relationship with Bechtel, meant the venture had a unique mixture of advantages.

Patersons Securities Gladstone branch manager Liam Barry told The Observer the announcement would add certainty to the project.

“It’s a great step forward for Origin,” Mr Barry said.

He said the investment decision meant Origin was a step closer to closing the gap on Woodside Petroleum as the sector’s “giant”.

“While the APLNG project is transformational for Origin in the long term, there will be significant challenges during construction in terms of managing costs and funding requirements,” Mr Barry said.

“However we believe that not only do Origin have the experience and skills to successfully execute such a large project, we also believe that Origin will maintain its current solid financial position, which will be underpinned by existing cash flows.”

“We currently have Origin as a ‘buy’ recommendation.”
 

Final Investment Decision

- The 2-train, US$20 billion plant will deliver an estimated revenue stream of US$7 billion per year.

- The initial US$14 billion invesment will build the first train, as well as infrastructure to support the second train.

- each of the 2 trains will have production capacity of 4.5 million tonnes per annum.

- First deliveries from phase 1 planned for 2015. First deliveries from second train in 2016.

- Sinopec has a 15% interest in the project.

- Origin and ConocoPhilips have a 20 year contract, worth $90 billion to supply gas to Sinopec from the first train.

- APLNG is working on agreements for sale of LNG from the second train.

- Origin and ConocoPhilips formed APLNG in 2008.

- ConocoPhilips is the largest coal seam gas operator in the world.

- Origin’s share price down $0.10 to $14.99 yesterday.