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JPMorgan fires up APLNG stake sale

Investment bank JPMorgan is reported to have started contacting prospective bidders for stakes on offer in the Australia Pacific Liquefied Natural Gas project (APLNG)

Both Australia’s Origin Energy and US major ConocoPhillips are offering to sell interests of between 7-9% in the coal-bed methane (CBM) to liquefied natural gas (LNG) project in Queensland.

At the maximum level, the new partner would take an 18% interest, while Origin and ConocoPhillips’s stakes would fall to 28.5% each. This would still leave them as the biggest equity holders in the venture ahead of major customer Sinopec on 25%.

Some of the sale terms are, however, putting off potential bidders, in particular the offer of just one board seat for the new partner, according to a report in the Australian Financial Review.

Analysts say this could rule out a consortium of Japanese buyers as each would want its own seat at the table. A Chinese buyer also seems unlikely due to Sinopec’s existing 25% interest in the APLNG venture, while ConocoPhillips is not expected to want another major LNG player in the mix. This makes it hard to envisage a natural investor in the scheme.

And a swift sell-down is not on the cards judging from competitor BG’s sluggish sale process for a stake in its Queensland Curtis LNG (QCLNG) venture. BG is believed to have put the sell-down for its CBM to LNG export plant on hold after buyers showed little interest in committing to a deal. 

Cost blowouts, labour challenges and stricter government approvals processes have presented challenges for the emerging CBM to LNG projects being built or proposed in the port town of Gladstone.

And some analysts even doubt whether the projects will even return the cost of their capital, particularly BG’s QCLNG venture.

Origin, however, maintains that APLNG’s project economics remain robust. The firm says that crude prices of just $35 per barrel over the life of the scheme are estimated to be enough to cover all the project costs and debt service commitments.

APLNG also has the best reserves position among the three CBM to LNG export plants being built in Queensland.

But Origin is under pressure to follow through with its sale in APLNG due to balance sheet constraints.

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