Origin Energy mulls east coast LNG import options

The power giant said it was open to either taking a stake or securing a supply deal with a gas import facility.

Investment bankers are likely pitching a range of options to Origin on the LNG export facility. Picture: AAP

Origin Energy will consider increasing its east coast gas exposure through an LNG import plant investment and kept the door ajar to a move offshore with the ageing Bass Strait gas fields up for sale.

The power giant said it was open to either taking a stake or securing a supply deal with a gas import facility amid expectations of a continuing tight market on the eastern seaboard in the next decade.

Origin will look at import plants “as a potential alternate supply of gas when it’s needed most in the market. The demand is obviously higher in winter months in Australia, and so being able to provide capacity when we need it is important,” chief executive Frank Calabria said after its investor day on Wednesday.

The energy player has been in talks with the Andrew Forrest-backed import scheme in Port Kembla about an offtake deal but also indicated it could look at investing in a facility in the future.

READ MORE: Surging LNG earnings bolster Origin profits | Don’t extend coal power plants: Origin

A new WoodMackenzie market forecast on Wednesday warned that while gas prices are expected to fall in the next two years the state of Victoria could face a gas shortfall earlier than expected by 2023 which will place pressure on gas buyers.

With ExxonMobil selling its half stake in Victoria’s Bass Strait gas field, Origin was also quizzed over its appetite to pursue a chunky offshore deal.

While not ruling out a tilt at Exxon’s assets, Mr Calabria said it would be a big jump for the company.

“It would be a big step for us to go back to that to be honest,” Origin’s chief said in reference to offshore gas production.

“As an investor into that asset it would be a big step for us to go into a late-stage, very complex and large offshore, but we need to contemplate this in the context of the whole east coast gas market and you’d expect us to be considered around that.”

Origin Energy CEO Frank Calabria. Picture: Lyndon Mechielsen

AGL Energy, a rival to Origin, said last month it would consider a bid for Exxon’s Bass Strait gas stake.

Origin is also looking at its options on a possible sell down of its Queensland infrastructure.

Rival Shell is reviewing whether to sell pipelines and jetties at its QCLNG project prompting Origin investors to ask whether it might follow suit at its adjacent APLNG facility and also consider a divestment.

Origin chief financial officer Lawrie Tremaine said a deal would be considered.

”I think others have done it and so we should consider it,” Mr Tremaine said. “Whether we’re able to will depend on particular legal structures and also does the incorporated joint venture help you in that or is it a barrier.”

Origin’s two partners on APLNG are Conoco and Chinese energy giant Sinopec.

“Right at the moment we don’t have a burning need to do it, but it’s well worth thinking about.”

There is also speculation ConocoPhillips might be considering dumping its 37.5 per cent stake in the joint venture.

Investment bankers are likely pitching a range of options to Origin on the LNG export facility amid market rumours Conoco is crunching its numbers on its share of the facility as it weighs better investment opportunities in the US and Canada, The Australian’s DataRoom column reported on Friday.

Asked about the speculation, Mr Calabria said he was unaware of its partners’ intent.

“I don’t know what Conoco’s intent is. I think overnight you would have seen they gave a longer-term picture about the predictability of the cashflows out of this and they’ve been a very good joint-venture partner to us. But I have no further knowledge of what was raised on Friday.”

Origin earlier lifted its 2020 financial year APLNG production guidance to 690 to 710 petajoules from a previous range of 680-700PJs due to strong field performance.

It expects to maintain that output over the next three to five years with the potential for a further production boost by tapping spare capacity.

The Sydney-based company outlined an improved break-even price for this financial year of $US31 to $US34 a barrel of oil equivalent from $US33 to $US36 per boe previously and against $US36 last year and $US39 in 2018.

Origin fell 0.6 per cent to $8.24.