JOHANNESBURG (miningweekly.com) – Australian energy firm Origin Energy expects Sinopec to fulfil its obligations to buy liquefied natural gas (LNG) from the Australia Pacific LNG joint venture (JV) project, the ASX-listed company said on Monday.
Origin responded to speculation that the Chinese buyer might not want all the gas it agreed to buy from the JV, in which Origin holds 37.5%, ConocoPhilips 37.5% and Sinopec 25%. The Chinese firm has a sales and purchase agreement (SPA) to buy 7.6-million tonnes a year from the project.
Origin confirmed that the SPA was structured as a take-or-pay agreement, which allowed Sinopec to decide where to take the LNG in order to manage the build up of key infrastructure and markets. “As the SPA is structured on a free-on-board basis, any exercise of this flexibility will not impact on Australian Pacific’s rights under the SPA,” Origin explained.
The SPA also provided Origin and ConocoPhillips, through Australia Pacific LNG, flexibility to determine the start date for supply of LNG to Sinopec. Origin said this was intended to occur after successful commissioning to ensure that the project could meet its obligations to supply cargoes under the supply agreement.
The LNG produced during the commissioning phase would be sold under short-term contracts. The company said Australia Pacific LNG had begun to contract these commissioning cargoes.
Origin also confirmed that the project remained on track for sustained production from train 1 in the second quarter of the 2016 financial year.