Origin selling APLNG cargoes at fixed price to limit low oil price exposure

Origin Energy said it is forward selling its LNG cargoes at a fixed price and buying put options on oil for the 2017 financial year in order to reduce its exposure to low oil prices.

Sydney-based Origin said in a statement on Tuesday, the transactions “are designed to mitigate a substantial proportion of Origin’s share of exposure to oil prices on volumes Australia Pacific LNG sells under existing contracts and to spot LNG prices on volumes above contracted commitments.”

Origin Managing Director Grant King said the company has limited the potential additional contributions to the APLNG beyond the A$1.8 billion revealed in August 2015.

He added that with the right to sell 15 million barrels of Japan Customs-cleared Crude (JCC) at a strike price of A$55/bbl for 75 percent of the volume and US$40/bbl for 25 percent of the volume, provided by the Oil Puts, even in the case oil prices drop to US$20/bbl for the entire 2017 financial year, Origin would additionally have to contribute A$200 million to APLNG.

The project, operated by ConocoPhillips is set to send its first ever cargo of liquefied natural gas onboard the 165,600 cbm Magellan Spirit, owned by Teekay, currently located at the A$25 billion (US$18 billion) LNG plant.

APLNG is a joint venture between ConocoPhillips (37.5 percent), Origin Energy (37.5 percent) and Sinopec (25 percent).

LNG World News Staff