Origin Energy rides LNG boom amid climate change demands
Several resolutions on climate change received strong support from Origin Energy shareholders at its annual general meeting.
Origin Energy said record LNG spot prices have boosted the outlook for its Australia Pacific LNG export project in Queensland as shareholders called for the power giant to take greater action on climate change.
Spot LNG prices in Asia have soared to records, amid a global scramble to secure supplies with China rushing to grab volumes to fix its energy crisis and low inventories in Europe spurring competition for the fossil fuel.
Rising LNG prices on the spot market and oil at multi-year highs had boosted the outlook for APLNG, offsetting tough conditions for its electricity business after a period of sustained low wholesale power prices that have eaten into its profits.
Origin in August had guided to $1bn in distributions from its APLNG business in the 2022 financial year, based on oil at $US68 a barrel and said there was now “upside” given booming commodity prices. Brent crude is trading above $US85 a barrel and LNG has soared to all-time seasonal highs above $US30 per million British thermal units.
“With the oil price sitting materially higher than the $US68 a barrel that we based our guidance on, we are today reiterating the upside to a higher oil price. We also note that Australia Pacific LNG has already sold three spot LNG cargoes into the tight Asian LNG market, with the mix of contract and spot LNG sales for the remainder of the year yet to be determined,” Origin chief executive Frank Calabria said at its annual general meeting on Wednesday.
The frenzy among buyers to grab gas volumes could lead to hugely lucrative shipments by Australia’s top LNG exporters, Credit Suisse has noted, with a single cargo topping $US100m and potentially doubling that if prices keep rising.
The power giant also copped several large votes from shareholders supporting resolutions on climate change following strong action taken by AGL Energy shareholders last month.
Aligning capital expenditure with a 1.5°C pathway was supported by nearly 44 per cent of shareholders while 36 per cent of investors backed a resolution calling on the company to suspend its membership of industry associations whose advocacy is inconsistent with the Paris Agreement.
“Origin has copped a significant rebuke from shareholders, who voted strongly in favour of resolutions calling on the company to align its capital expenditure and lobbying with a 1.5°C pathway,” Australasian Centre for Corporate Responsibility’s Dan Gocher said.
“Origin has to go back to the drawing board and come up with a real strategy if it is genuinely committed to a pathway consistent with 1.5°C.”
Origin — which owns Australia‘s largest coal power station at Eraring in NSW — said pressure on coal had also accelerated a focus on carefully managing a transition to renewables backed up by firmed electricity.
“As we look ahead to the closure of more and more coal fired power stations and likely in earlier timeframes than previously earmarked due to increasingly challenging economics, we must make sure the National Electricity Market encourages investment in new firm, dispatchable capacity so we can continue to support growth in renewables,” Mr Calabria said.
Origin plans to run Eraring until 2032, but chairman Scott Perkins said planning for different dates was also being considered, amid growing expectations within the industry coal would be forced out early.
“Our stated plan has been to exit coal fired generation by 2032, although we do note that the operating conditions for baseload power stations continue to be very challenging with wholesale prices at historically low levels. As a result, we continue to plan for a range of different scenarios that may eventuate,” Mr Perkins said.
Origin reiterated its guidance for the 2022 financial year.