Origin Energy dismisses speculation on $19bn Australia Pacific LNG project

Australia-based Origin Energy has reassured investors about the sale and purchase agreement (SPA) with China Petrochemical (Sinopec Group) for the A$24.7bn ($19bn) LNG export project in Queensland.

The reassurance comes amid speculations that the Chinese customer is likely to defer or modify the terms of the previously-signed long term contract with the Australia Pacific LNG project.

The LNG project is a joint venture between Origin (37.5%), ConocoPhillips (37.5%), and Sinopec (25%).

Under the terms of the contract, Sinopec has agreed to purchase up to 7.6 million tonnes of gas from the project per year.

The speculations on postponement of the deal was triggered amidst the delay in completing Sinopec’s LNG import terminal in Guangxi province and the dwindling gas demands in China.

Australia Pacific LNG has started offering the initial LNG production under short-term contracts.

Sinopec has been offered flexibility in terms of the place for the gas cargo supply, said Origin Energy.

Origin also informed the deal to be ‘take-or-pay’ which indicates that Sinopec will need to pay for the deal even if it turns down the delivery, reported AFR.

The partners, Origin and Conoco, also have the flexibility to decide when to begin the LNG supply from the project. The deliveries will only be made after the project commissioning is successfully completed.

Australia Pacific LNG project is likely to start sustained production from Train 1 in the second quarter of the 2016 financial year.