Origin Expects Sinopec to Fulfill Contract to Buy LNG from APLNG Project

Origin Energy on Monday said that Sinopec is expected to fulfill its obligations to buy LNG from Australia Pacific LNG (APLNG) under the sale and purchase agreement (SPA).

The company was reacting to recent media reports that the Chinese firm, which is also a stakeholder in the project, was unwilling to take deliveries of the fuel from the Queensland project.

“While the specific terms of the SPA are confidential, Origin confirms that the SPA is structured as a take-or-pay agreement. As is typical under these types of agreements, there is flexibility for Origin and ConocoPhillips, through Australia Pacific LNG, to determine the start date for supply of LNG to Sinopec under the SPA. This is intended to occur after successful commissioning to ensure that the project can meet its obligations to supply cargoes under the SPA. The LNG produced during the commissioning phase will be sold under short term contracts. Australia Pacific LNG has begun to contract these commissioning cargoes,” Origin said in a statement.

“Whilst Sinopec's take-or-pay obligation will commence on the start date determined in accordance with the SPA, the SPA does provide Sinopec with flexibility in terms of where it can take the cargoes, 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 by Sinopec would not impact Australian Pacific LNG's rights under the SPA.”

Australia Pacific LNG is an incorporated joint venture between Origin (37.5%), ConocoPhillips (37.5%), and Sinopec (25%). Australia Pacific LNG has an SPA to supply LNG equivalent to 7.6 million tonnes per annum to Sinopec.

Origin reiterated that the project remains on track for sustained production from Train 1 in the second quarter of the 2016 financial year.