Australia's Origin strikes supply deal with Gladstone LNG
Australian gas explorer Origin Energy has agreed to supply gas to the partners of the rival Gladstone LNG (GLNG) project, providing a boost to the Santos-led project's efforts to secure adequate reserves ahead of a 2015 start-up target.
According to the binding heads of agreement, Origin will supply GLNG with 365 Petajoules (PJ) - or around 9.5 billion cubic metres - of gas over a 10-year period at the Wallumbilla processing hub, starting from 2015.
The agreement also gives Origin the option to retain 1.825 PJ/year of gas in its portfolio during periods of high gas or electricity market demand on Australia's east coast, Sydney-headquartered Origin said in a statement.
Santos operates the GLNG with a 30% stake, while French oil and gas major Total and Malaysia's PETRONAS hold 27.5% each with South Korea's KOGAS holding the remaining 15%.
While Australian oil and gas producer Santos plans to feed most of the reserves for the two-train 7.8m tonne per annum (mtpa) GLNG development from its coal seam gas (CSG) reserve base in Queensland's Surat and Bowen basins, it has not been averse to signing third-party agreements for conventional supplies to meet the initial ramp up of LNG capacity in 2015.
The contract with Origin is the second such deal for conventional supplies after Santos signed an agreement with GLNG in late 2010 for conventional supplies from the Cooper Basin in central Australia over a 15-year period through its joint venture with Origin and Beach Energy (see GLM 29 October 2010).
Neither Origin nor Santos disclosed the exact price of the deal, but said that it was indexed to crude oil.
"The gas sales agreement with GLNG will deliver significant value to Origin, opening an export channel to market for our legacy fuel reserves and allowing a more rapid monetisation of the resource in line with international oil-linked pricing," said Origin's managing director Grant King.
An Origin spokesperson said the company would source the gas from its east coast conventional fuel portfolio and the deal was not related to the reserve base for its Australia Pacific LNG (APLNG) project.
Origin is in a partnership with US major ConocoPhillips (37.5%) and Chinese state energy company Sinopec (25%) in developing APLNG. While the partners are expected to take a decision on the project's second 4.5mpta train 2 expansion by the end of June, ConocoPhillips last week expressed doubts on the existing prospects of expanding the project via a third and fourth liquefaction train (see GLM 27 April 2012).
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