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Origin Energy’s ability to fund APLNG project not impacted by oil prices

World Coal,

Origin Energy has said falling oil prices will hit its profits but not its ability to fund its share of the Australia Pacific coalbed methane (CBM) to LNG project in Queensland.

Costs for the 9 million tpy APLNG project in Queensland remain exposed to increased costs in non-operated areas but are not expected to be materially different from its budget of AUS$24.7 billion (US$20.50 billion), Origin said. 

It has a 37.5% stake in APLNG, as does ConocoPhillips with Chinese state-controlled oil firm Sinopec owning the remaining 25%. APLNG aims to ship its first cargo in the second half of 2015.

The APLNG project will see gas sourced from coal seams and transported via pipeline to LNG trains at APLNG. The CBM will be converted to LNG and transported to international export markets, with China one of the likeliest key destinations.

According to Argus Media, Origin expects upstream operating expenditure on operated and non-operated CBM gas fields, pipelines, electricity purchases and royalties of around AUS$1.2 billion/yr on average for the APLNG project.

Such operating costs reflect the drilling of about 300 operated wells a year at a cost of about AUS$3 million for each connected well, as well as APLNG's share of about 300 non-operated wells per year. The spending will also be on processing facilities post-LNG production for both operated and non-operated wells, it said.

In a press release, Origin recently announced it had completed the amendment of syndicated loan facilities to reduce interest cost and extend maturities.

Origin Executive Director, Finance and Strategy, Karn Moses, said "Given the attractive funding costs we saw it as prudent to take the opportunity to add to the existing facilities, further supporting a conservative liquidity buffer through start up of Australia Pacific LNG's first and second train.”

Guidance for Origin's cash contribution for 2014-15 of around AUS$3 billion provides enough funding without relying on the timing of revenue from gas sales that are not in APLNG's control, the company said.

Origin said 8.6 million tpy of APLNG production are oil-linked prices or about 470 PJ/yr (12.55 billion m³/yr) of gas. APLNG also has domestic contracts of around 120 PJ/yr and sales to the Queensland Curtis LNG operated by UK energy firm BG of about 25PJ/yr.

Edited from various sources by Sam Dodson

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