Origin says it expects Sinopec to fulfill APLNG contract

June 29, 2015

Origin Energy said it expects that China’s Sinopec will fulfil its obligations under the long-term deal to buy LNG from the US$19 billion Australia Pacific LNG project.

The company issued a statement on Monday after market speculation emerged that Sinopec may seek to resell the chilled gas from APLNG amid delays to construction of an import terminal.

Australia Pacific LNG is a joint venture operated by ConocoPhillips. Origin and ConocoPhillips each hold a 37.5% stake while Sinopec has a 25% stake in the LNG export project located on Curtis Island off Gladstone.

APLNG has an SPA to supply the chilled gas equivalent to 7.6 million tonnes per annum to Sinopec.

“While the specific terms of the SPA are confidential, Origin confirms that the SPA is structured as a take-or-pay agreement. As is typical under these types of agreements, there is flexibility for Origin and ConocoPhillips, through Australia Pacific LNG, to determine the start date for supply of LNG to Sinopec under the SPA,” Origin said in the statement.

This is intended to occur after successful commissioning to ensure that the project can meet its obligations to supply cargoes under the SPA. The LNG produced during the commissioning phase will be sold under short term contracts.

Australia Pacific LNG has begun to contract these commissioning cargoes, according to the statement.

“Whilst Sinopec’s take-or-pay obligation will commence on the start date determined in accordance with the SPA, the SPA does provide Sinopec with flexibility in terms of where it can take the cargoes, in order to manage the build up of key infrastructure and markets,” Origin said.

As the SPA is structured on a Free on Board basis, any exercise of this flexibility by Sinopec would not impact Australian Pacific LNG’s rights under the SPA, it added

The Australia Pacific LNG project remains on track for sustained production from Train 1 in the second quarter of the 2016 financial year.

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LNG World News Staff; Image: APLNG