Chinese state oil giant Sinopec has injected around $2.1 billion into Australia Pacific LNG to finalize its acquisition of an additional 10% equity in the joint venture, which is building an LNG export project in the east coast city of Gladstone.
The deal, completed Thursday, lifts Sinopec's total holding in Australia Pacific LNG from 15% to 25%, diluting the stakes of ConocoPhillips and Origin Energy to 37.5% each. Origin said last week that the founding partners had begun a joint process to further dilute their interests in the project to around 30% over the longer term.
The increase in Sinopec's shareholding was contingent on Australia Pacific LNG taking a final investment decision, announced July 4, on a second LNG production train at its Gladstone project. The joint venture approved and began work on a first 4.5 million mt/year LNG train on Curtis Island in Gladstone in July 2011.
The two trains, based on Australia Pacific LNG's coalseam gas reserves in Queensland's Bowen and Surat basins, are budgeted to cost A$23 billion ($23.5 billion). The first train is scheduled to start up in mid-2015, with the second targeting first exports in early 2016.
Sinopec's additional equity subscription provided Australia Pacific LNG with a net payment of $1.4 billion for value determined as at January 1, 2011. The amount was adjusted for Sinopec's share of capital expended since then, and the new funds will be used to meet project expenditure before any additional cash is required from Origin, ConocoPhillips and Sinopec, Origin said.
All conditions precedent have now also been met for the supply of an additional 3.3 million mt/year of the project's LNG to Sinopec, Origin added. That deal will boost Australia Pacific LNG's total sales to Sinopec to 7.6 million mt/year from 2015.
Japan's Kansai Electric Company has also signed up to lift 1 million mt/year of LNG from the project.
Australia Pacific LNG has 12,810 petajoules of proven and probable gas reserves in Queensland, where it plans to drill around 1,100 wells to support the ramp-up requirements for two trains.
The project is one of three coalseam gas-to-LNG plants currently under construction on Curtis Island and scheduled for startup in the 2014-2015 time frame. UK-based gas giant BG Group's QGC subsidiary is constructing an 8.5 million mt/year facility and a consortium led by Australia's Santos is working on a 7.8 million mt/year plant.
Both BG and Santos have recorded cost overruns at their projects in the past two months, with BG's budget blowing out from $15 billion to $20.4 billion, and Santos bringing forward an additional $2.5 billion in development spending, taking the joint venture's outlay to $18.5 billion.
