CANBERRA: While prices may still be woeful, there is no complaint about the production performance of Origin Energy’s $25 billion Australia Pacific LNG project in Queensland. The ramp-up of the project has helped Origin Energy almost double September quarter revenues from oil and gas, despite the slide in oil and LNG prices.
The first production unit at the two-train project has also passed performance tests required by lenders for the $US8.5 billion project financing, lowering the amount of debt that Origin needs to provide a guarantee for. Some $US5.1 billion of guarantees provided by the venture partners to the project financiers have been released, with Origin’s guarantees more than halving to $US1.3 billion from $US3.2 billion.
The bumper quarter of production is the first reported under Origin’s new chief executive Frank Calabria, who took over from long-standing CEO Grant King after the annual general meeting earlier in October. Mr Calabria said the completion of the project finance tests for the first train “demonstrates the project is performing in line with lenders’ expectations”.
RBC Capital Markets analyst Ben Wilson said the “solid start” to output this financial year gave confidence that Origin was on track to “materially reduce” its debt and meet full-year earnings guidance as outlined at the AGM. Alan Hirshberg, executive vice-president of production and projects at ConocoPhillips, Origin’s major partner in APLNG, told investors last Thursday that the start-up of the second train had also been “very smooth” and the unit had been ramping up with “no issues”.
The first train is running at more than 10 per cent beyond the unit’s rated capacity, Mr Hirshberg said. “Where we’re headed next there is that we’re … focused on the upstream side, on ramping our gas supply to be able to run both trains at full capacity,” he said. “We’re not at that point yet. I expect it will be sometime in the second quarter before we have enough gas supply from the upstream side to be able to run both trains at full tilt. And that’s when we’ll be looking to do our Train 2 lenders’ test,” he said, adding that test should take place in about May.
