MidOcean’s plan for new global gas giant with Origin takeover
If the Brookfield-EIG takeover of Origin goes through, it will cement the foundations of a new global gas player. Its chief executive De la Rey Venter used to run Shell’s massive global LNG strategy and operations and has been wooed on board.
London-listed MidOcean, controlled by EIG, would take on Origin’s stake in the APLNG asset in Queensland and Venter has flown into Sydney to meet the troops and ensure the deal gets done.
Activists that only see gas as a fossil fuel will be outraged at a new multibillion-dollar LNG company but for all practical purposes gas is and will continue to be at the core of energy transition.
Venter is a true believer in the ESG role for gas. He expects global LNG to double in size over 20 years and he is ready to jump in where others are offloading exposure.
“You have publicly owned companies, integrated oil companies and public utilities where their stakeholders are compelling them to invest less in LNG and more in other energy transition plays,” says Venter.
“The gap between what the growing LNG market needs and what the traditional supply side is filling continues to grow. And that creates opportunities for us, here and elsewhere in the world.”
EIG has a long-held conviction on Australian LNG. Its tilt at Santos and an earlier attempt to buy a 10 per cent stake in APLNG were unsuccessful, but recently MidOcean bought Tokyo Gas’s stakes in four LNG projects around Australia.
The $18bn Origin deal presents a bigger opportunity: a 27.5 per cent stake in APLNG.
Venter says EIG deliberately chose to build a company focused on LNG for the long term. Investing through funds only has a lifespan of 10 or 15 years before they are liquidated.
MidOcean is targeting strong cash flows in existing assets like APLNG rather than greenfield developments that take seven or eight years to earn revenue.
“It is a big, quality asset. It does the Asia-Pacific energy transition a world of service in what it supplies into China and Japan,” says Venter. “We believe in the quality of the regulatory environment and the quality of governance and quality of assets that we can see here.”
Venter’s praise of Australian regulation is worth exploring. He understands the near-term political imperative of government intervention with an expected price cap of $11 to $13 a gigajoule but looks through it.
That price cap may put young developers with recurring infrastructure costs under pressure. It may even bring opportunity for MidOcean.
Far more important to Venter are the long-term LNG contracts that underpin the market: Australia’s export contracts with Asia and in the domestic market, where APLNG supplies 30 per cent of the gas into the east coast.
In Europe a push away from long-term contracts has left economies exposed to volatile spot markets during the energy crisis.
Venter says Europe is starting to turn. “Qatar just signed a long- term deal with Germany, Woodside just signed a mid-term deal with Germany’s Uniper and just last week it supplied a cargo from the North West Shelf all the way around to Europe,” he says.
Long-term contracts are fundamental to driving investment and development for big gas. This is why Venter will weather a price cap, and perhaps other policies that incentivise market behaviour to bring energy prices down.
MidOcean plans to use APLNG to build a major presence in the Pacific and Atlantic basins, the two huge LNG markets. That footprint will allow him to use the skills he has honed at Shell.
“You have supply close to most of the major markets in the world, you optimise your logistics, cost, and create all sorts of arbitrage opportunities,” he says.
