Origin spends up to counter lower gas output from field decline

The gas and electricity giant has forecast lower gas volumes at its APLNG facility near Gladstone in Queensland.

Origin Energy CEO Frank Calabria. Picture: John Feder/The Australian

Origin Energy faces a decline in gas production from its flagship Australia Pacific LNG project in the year ahead, forcing it to lift spending to offset organic field decline and maintain supply to the east coast.

Output from APLNG – in which it holds a 27.5 per cent stake – is projected to fall to between 635 and 680 petajoules in 2026 financial year, down from 682 PJ in 2024-25. The downgrade reflects “lower output in some operated and non-operated fields due to natural field decline,” Origin said in its quarterly report released on Thursday.

Despite the softer outlook, Origin said APLNG “continues to be a reliable supplier of gas to its customers and the domestic market and delivers consistent cash flow to Origin, now in the form of fully franked dividends”.

To stabilise production, Origin has lifted its capital and operational expenditure guidance for fiscal 2026 to between $2.9bn and $3.2bn, up from $2.8bn in fiscal 2025. The increase will fund a ramp-up in field optimisation, infrastructure upgrades and new exploration activity.

“We are already advanced in executing our strategy, which is to increase investment in well optimisation ahead of expected production from development drilling and exploration, as well as potential infrastructure projects to support medium term supply,” said chief executive Frank Calabria.

“We are encouraged by the early success we have seen from executing optimisation initiatives in FY25, and continue to see strong reserves replacement.”

Origin said it would allocate about $150m to “low cost optimisation activities,” including artificial lift conversions, solids mitigation and debottlenecking projects. A further $150m is earmarked for exploration and appraisal activity and “potential infrastructure projects … subject to JV approval.”

The eastern fields – Condabri, Talinga and Orana – saw output fall by 10.5 PJ in fiscal 2025, which Origin attributed to “the cumulative impacts of turndown events including unplanned outages, and lower than expected benefits from well optimisation activities.”

In contrast, the western assets recorded a 9.5 PJ increase due to “strong field performance (new wells and optimisation projects).”

Origin maintained that its long-term ambition to keep unit costs below $4.30 per gigajoule on average through fiscal 2028 remained intact, although it noted “investment in exploration and appraisal, and major projects would be additional.”

Despite the production headwinds, APLNG delivered strong cash returns. Origin received $797m in fully franked dividends in fiscal 2025 and a further $335m in July. LNG revenue for the year was stable at $8.8bn.

“Origin is continuing to perform well across our core businesses,” Mr Calabria said. “Our early work in FY25 has shown strong results in well performance and reserves replacement. The next phase is about scaling that success across the portfolio.”

The shares fell 1c to $11.67.

Originally published as Origin spends up to counter lower gas output from field decline