PERTH (miningweekly.com) – The Australia Pacific liquefied natural gas (APLNG) project is unlikely to be affected by lower oil prices in the near future, operator Origin Energy said on Wednesday.

Speaking at the company’s annual general meeting, chairperson Gordon Cairns said that, even if oil prices were trading at between $23/bl and $25/bl, the APLGN project would still be operating at breakeven point.

It was expected that oil prices would only influence APLNG in 2017, when the project was producing from two trains.

“If oil prices recover, APLNG will be producing strong positive cash flows and we will be seen as having foresight to recognise the global importance of gas, the courage to take on such a massive investment and the decisiveness to restore confidence in this investment,” Cairns said.

Cairns’ optimism comes just a month after MD Grant King warned that a continued low oil price could impact the future earnings from Origin’s investment in the APLNG project, and announcing plans that Origin had initiatives in place to reduce the project’s operating and capital costs by $1-billion a year below costs experienced during the construction phase.

Of this, about $650-million had been achieved in the 2015 financial year with the remaining $350-million of cost reduction initiatives to be implemented by the end of the 2016 financial year.

King said on Wednesday that, along with a A$2.5-billion entitlement offer, the suite of initiatives implemented by Origin, which also included a reduction in the dividend guidance for the next two years and some A$800-million in asset sales, would see Origin reduce its debt to less than A$9-billion by the end of 2017, even if no financial contribution was seen from the APLNG project. 

The $24.7-billion APLNG project would comprise two processing trains, each with a 4.5-million-tonne-a-year nameplate production capacity.

First LNG from the APLNG project was expected within two weeks.

Meanwhile, Origin on Wednesday said the proponents of the APLNG project would “strongly defend” against legal action by Tri-Star entities, which served APLNG with a statement of claim in relation to a 2002 sales and purchase deed.

Tri-Star was insisting that certain interests in the APLNG project should now revert back to it, after certain conditions were met.

Some 22% of the APLNG’s 3P coalseam gas reserves were subject to the reversionary rights agreement with Tri-Star.

While Tri-Star filed a claim in the Queensland Supreme Court some 12 months ago, it had not served APLNG with the claim until this week.