Origin moves to calm LNG contract fears

Origin Energy boss Grant King is playing down fears that its contracts with China's Sinopec could be threatened by a slump in LNG demand.

Origin Energy has moved to allay concerns that slumping Chinese demand for natural gas could threaten its long-term contracts with China's oil giant Sinopec.

Speculation has been mounting that Sinopec could have to find buyers to on-sell some of the gas it is contracted to taken from the Australia-Pacific LNG project (APLNG) at Gladstone in Queensland.

But some market watchers fear that Sinopec could struggle to find buyers for the gas following a rise in prices and could then try and put a lid on output from the LNG project.

Origin managing director Grant King on Wednesday said he had "no reason to think" that Sinopec wouldn't stick to the terms of the contracts.

"We're still very comfortable that ... China will consume a lot of gas and a lot of that gas will be LNG," Mr King told reporters on Wednesday.

"There should be no surprise that there's flexibility in those off-take arrangements at first year... That's perfectly normal."

The comments come after reports this week, sparked by a Credit Suisse research note, claimed that the Origin Energy/ConocoPhillips-run LNG project at Gladstone could come under threat amid speculation that Sinopec was attempting to renegotiate its APLNG deal.

Media reports have suggested that Sinopec could have to resell some of the more than seven million tonnes a year of LNG it has agreed to take from APLNG over two decades due to sliding demand.

Meanwhile Mr King has welcomed legislation passed through federal parliament to slash the renewable energy target.

The deal, which passed the Senate on Tuesday night, will cut the target from 41,000 gigawatt hours to 33,000.

"It's a real positive thing that the RET has gone through, he said.

"It went through with bi-partisan support so that's really important."

Earlier, in a speech to the Australia Israel Chamber of Commerce, Mr King called Australia a "gold medal performer" on the environment, claiming the country was often unfairly identified as one of the world's worst polluters on a per capita basis.

"This is a completely misleading measure because it only prioritises one of the two goods we're seeking to serve, and that is the environmental outcome," he said.

2 min read
Published 24 June 2015 at 3:44pm
Source: AAP