Origin warns against unrealistic expectations for domestic gas prices
Origin has warned against ‘unrealistic’ expectations for domestic gas prices, amid attempts to reduce what Australians pay.
Origin Energy has warned against unrealistic expectations for domestic gas prices after earlier reaffirming its 2021 earnings guidance for its energy markets division and retaining its Australia Pacific LNG production target.
The Morrison government is preparing to “strengthen price commitments” as it looks to negotiate a new heads of agreement with Queensland gas exporters, including Origin, to ensure sufficient supplies at affordable prices are available to the market.
Andrew Liveris, an adviser to the Morrison government, has targeted $4 a gigajoule gas as an achievable target for the east coast market despite producers rejecting it as an unrealistic price, raising concerns the government may look to set a price target for gas producers.
Origin, which operates the $25bn APLNG gas export project in Queensland, cautioned against any regulatory moves at its annual general meeting on Tuesday.
“We continue to caution against arbitrary or unrealistic gas price expectations, noting the cost of domestic gas must reflect the life cycle cost of production, and that gas producers, like any company, should be able to earn a return on the significant capital required to bring gas supply to market,” Origin chief executive Frank Calabria said.
Origin also defended its decision to take a writedown on APLNG saying it had taken a more conservative view of future oil prices than its competitors.
“We could have taken a more optimistic view of the oil price as some of our competitors did and we would have had no impairment,” Origin chairman Gordon Cairns told the AGM. “As a board you would expect us to be appropriately conservative in this area.”
Origin expects earnings from its core energy markets division would decline by up to 21 per cent or $309m to a range of $1.15bn to $1.3bn in the 2021 financial year from $1.46bn in 2020.
APLNG production is also estimated to be as much as 8 per cent lower at 650-680 petajoules due to lower demand as the Asian LNG glut dampens the market.
Origin’s depressed share price remains the biggest regret for Mr Cairns, who steps down as Origin chairman on Tuesday, to be replaced by Scott Perkins.
“This is my one major disappointment,” Mr Cairns told the AGM. “Despite the strong operational performance over recent times, the share price is not where we would like it to be.”
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