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



How to survive a bushfire in your car

IT SOUNDS like a nightmare, but it can happen.

Eight reasons to join the RFS

SPREAD across 93% of Queensland, the Rural Fire Service has about 36,000 volunteers. And you could be one of them.

What if my insurer gives me grief?

CLAIMING your insurance cover after a natural disaster can go one of two ways. It can be a breeze, or like pulling teeth.

$700K Gladstone project will open next week

The proposed Pump Track at Memorial Park in Gladstone.

Start date for Gladstone pump-track announced.

Gladstone doctor: Why you need to know the signs of a stroke

Gladstone Base Hospital, Park Street, Gladstone.



Photo Christopher Chan / The Observer

"The brain is a big computer and if part of your brain stops working

Number of Gladstone FIFO workers nearly halves: report

THE number of non-resident workers halves between 2013-2015

Number of FIFO workers nearly halves: report

Local Partners

Jennifer Lawrence gives keys to new partner

Oscar winner Jennifer Lawrence

Oscar winner settling down with new partner

Rogue One star proud to lead new Star Wars film

Felicity Jones leads the new Star Wars film

Star Wars lead proud to be in front in sci-fi

What's on the small screen this week

Ernie Dingo stars in the TV series Going Places with Ernie Dingo.

ERNIE Dingo stars in a new travel series and Seven airs the AACTAs.

Mandy Moore feels like she's 60

Mandy Moore sees herself as a 60-year-old rather than a 32-year-old

Goooodbye Hamish and Andy (from our radios)

Hamish and Andy

The pair have been on air since 2006

David Attenborough on facing his mortality

Sir David Attenborough in a scene from the TV special The Death of the Oceans.

Life without Sir David Attenborough is hard to imagine

Chinese locked out of Australian property market

The rules are different if you're a foreigner

The buyer was from China - the trouble started right there

Morrison signs off on new affordable rental model

Australia's Treasurer Scott Morrison speaks during a press conference after a meeting of the Council of Federal Financial Relations at Parliament House in Canberra, Friday, Dec. 2, 2016.

Scott Morrison signed off on development of a new financing model

Family scoop bargain $160K 'holiday home' in Gladstone

BARGAIN: A Biloela family has purchased 21 Ann St for $160,000. They try to get to Gladstone at least once a month.

ADVERTISED as "renovate or demolish", but snapped up for getaway.

REVEALED: Gladstone property prices hit lowest in downturn

Aerial View overlooking Kin Kora residential area, Gladstone.



Photo Brenda Strong / The Observer

GLADSTONE PROPERTY prices have hit their lowest since the bust.

Coast high-flyer's fight back from bankruptcy, $72m debt

Scott Juniper went from millionaire developer to declaring bankruptcy in2012, now he is back on top of his game again with new developments including this one in Coolum.

'Apocalyptic lending storm' causes financial collapse.

Ready to SELL your property?

Post Your Ad Here!