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Origin boosts APLNG reserves base

Australia’s Origin Energy today announced an increase in proven and probable coal-bed methane (CBM) reserves earmarked for feedstock for the Australia-Pacific Liquefied Natural Gas (APLNG) development, in Australia’s Queensland state, and has hinted it may further reduce its stake in the A$20 billion ($21 billion) project

The news came as Origin booked interim net profit of A$794 million for the half-year to 31 December 2011, partly due to strong commodities prices and the sale of part of its stake in APLNG to China’s Sinopec. In the year-earlier period, the firm reported a loss of A$136 million.

In its results statement, Origin said the project’s proved and probable reserves now stand at 12 trillion cubic feet (cf), up from around 10.5 trillion cf at the end of June last year. Contingent resources have also increased, to 15 trillion cf from 10 trillion cf.

Origin said it was well funded for the first phase of APLNG following a major capital raising programme last year. It has A$5.5 billion in undrawn facilities to hand, but said it may need further funding for APLNG's planned second train. Origin had hoped to make a decision on the second train by the end of this quarter, but a delay in approving the Sinopec deal had pushed this back. Origin said a decision is now likely by mid-year.  

Grant King, the company’s managing director, said Sinopec was in the process of obtaining Australian and Chinese government approvals for the equity purchase, and there was “no issue” with the delay. In a conference call after the results announcement, he said: “We are not in control of that timetable ... and we're quite confident that they (government approvals) will be achieved.” 

The stake sale will see Origin reduce its 42% interest in APLNG to 37.5%. Once the deal goes through, Sinopec will hold 25% of the project.

Finance director Karen Moses told analysts: “Clearly, our dilution with APLNG bringing in Sinopec brings in funding. Any further dilution would also do that.”

It is understood Origin could pare back its equity in the project and secure any further funding needed for the second train via debt. The firm did not give an estimated price for the second train. However, marketing agreements are in place to underpin two trains. Sinopec will take all the first train volumes of 4.3 million tonnes a year (t/y), while Japan’s Kansai Electric has agreed to buy the second train’s 4.3 million t/y.

The first train is on track for commissioning in mid-2015, while train two is scheduled for early 2016.

APLNG is one of five CBM-to-LNG developments planned in Queensland. All will tap CBM reserves in the Surat and Bowen basins.

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