Major LNG terminal faces backlog as vessel loses power

One of Australia’s largest LNG exporting facilities can’t load any new vessels after a ship has lost power, blocking others from docking at Curtis Island.

One of Australia’s largest LNG export sites faces backlogs after a loaded vessel lost power and became stuck at the Australia Pacific LNG facility on Curtis Island in Queensland, Origin Energy has said.

Origin, which part-owns the facility, said only one vessel can be loaded at a time and as a result two vessels have already had their shipping slots delayed, with others expected.

Loading of LNG vessels runs nearly continuously with ships tightly scheduled leaving little wriggle room to find time to make up for any delays.

Origin did not reveal when repairs to the vessel would be completed. Shipping data indicates three vessels waiting to load.

Prolonged delays will create a backlog of vessels waiting to be loaded and will cause headaches to ConocoPhillips, the operator of the APLNG, which will have to manage the gas stores. Port authorities will also need to oversee a potential build-up of LNG ships.

The vessel remains connected to electrical supplies at APLNG and it cannot move the vessel until it has restored its own power sources. Without power the loaded LNG would revert back to its natural form which would see the gas escape, heightening safety concerns. LNG is gas transported on a vessel in liquid form at minus 160 degrees celsius.

While APLNG will seek to limit the financial impact, the inability to load vessels will cause losses. Analysts estimated losses of revenues would be approximately $25m a day, though sources familiar with the situation said it was too early to make any determinations and some losses could be recouped from insurance. The toll would be shared across APLNG’s owners, ConocoPhillips, Origin and Sinopec.

Origin did not say where the LNG was destined for but the bulk of APLNG volumes are sold to China’s Sinopec and Japan’s Kansai Electric.

The Hong Kong owned ship, Cesi Qingdao, was due to travel to Wenzhou in China, shipping data shows.

Origin, which is the upstream operator, said it is lowering production from gas wells in Queensland and will increase supplies to the domestic market.

An increase in domestic gas supplies will be a welcome short-term boost to users, though the overwhelming majority of customers will be contracted and the lower prices will have little bearing.

Increased supplies, however, could aid gas storage levels, which could be used in the event that Australia experiences soaring demand for electricity or a coal generator experiences an outage.

Shares in Origin, which has a 27.5 per cent stake in APLNG, fell nearly 1 per cent following the announcement, before closing down 0.7 per cent at $8.47. However the company remains under pressure from the uncertainty surrounding the near $20bn offer from Brookfield and EIG.

Brookfield and EIG are pushing a revision to its existing offer of $8.43 a share for Origin, a deal that was set to be rejected before the new last-minute bid was made.

Under the terms of the new offer, Brookfield and EIG will pay shareholders $9.43 a share, with the option of institutional investors buying in. This also requires support of 75 per cent of shareholders, which Brookfield and EIG was on course to fail to reach.

If that vote fails, then Brookfield and EIG has proposed that Origin shareholders would be offered $9.08 a share from EIG and Brookfield would buy the energy markets business for $12.3bn from its consortium partner. Critically, this deal requires support from 50.1 per cent of Origin’s shareholders, undercutting the capacity of AustralianSuper — which has a 17.5 per cent stake in Origin — to scupper the deal.

Origin’s board of directors has said it has yet to reach a formal decision on the revised bid, but the company’s chairman Scott Perkins said the energy giant has significant reservations about the offer.

Should the revised bid be rejected, then Origin shareholders will be asked to vote on the current tabled offer of $9.43 a share, which AustralianSuper has said it will continue to oppose.

AustralianSuper’s head of infrastructure Nik Kemp on Tuesday said the superannuation giant wants to continue to hold Origin Energy and questioned whether a private equity company was the right owner of Brookfield, which would acquire the energy markets business of Australia’s largest electricity and gas retailer. EIG will take the 27.5 per cent stake in APLNG.

“We agree with the fact that there is a need to invest into the renewable landscape in Australia that is absolutely compelling and needed. We question whether short term PE type capital is the right capital to do that next to. So doing it with a management team that actually has a track record of doing it here in Australia and has done it, might be a better way to do it,” said Mr Kemp.

“We don’t think that the value is currently there on the table, and you just look at the AGL share price, that’s what’s happened to that since the Origin offer was put to where it is today, and then compare that to Origin, and it doesn’t look that compelling.”