US major ConocoPhillips and Australia's Origin Energy have approved on Wednesday a second train for the onshore Australia Pacific liquefied natural gas (APLNG) project, despite concerns over rising LNG project costs.
The deal also sees China's Sinopec increase its stake in the $23.7 billion (A$23 billion) APLNG project from 15-percent to 25-percent, while ConocoPhillips and Origin will each see their individual stake reduced to 37.5-percent.
The approval for the second train comes at a time when other LNG projects in Australia are battling a surge in costs. Australia's Santos reported on June 28, 2012, that the cost of its Gladstone LNG project would increase by 16-percent to $18.5 billion due to a shortage of gas. The company was forced to push forward a $2.5 billion expenditure, which was initially slated to be spent after 2015, so that it could drill an additional 300 wells.
Origin had acknowledged in a statement that the company is not immune to future cost pressures.
"There have been cost increases announced by third party LNG projects in which Australia Pacific LNG is a non-operating joint venture participant in specific upstream gas fields," Origin said.
"Origin's remaining funding requirement for its 37.5-percent of APLNG for the period from July 1, 2012, to first production from both LNG trains is approximately $3.7 billion (A$3.6 billion). Any dilution of Origin's interest in APLNG below 37.5-percent will improve this funding position," Origin added.
Origin's partner, ConocoPhillips, also issued a statement separately to express its stand in the APLNG project. "The APLNG project is strategically positioned to commercialize its superior coal stream gas (CSG) reserve position and satisfy Asia's rapidly growing demand for reliable, cleaner-burning energy," ConocoPhillips's chairman and CEO Ryan Lance said.
The APLNG project sees the construction of two 4.5 million tonnes per annum (mtpa) CSG-to-LNG trains. The first train will start its first LNG exports from mid-2015, while the second train is scheduled to commence its first LNG exports from early-2016.
Most of the plant's production will be sold to Sinopec through a 20-year contract for 7.6 mtpa of LNG purchases from 2016. APLNG also has a 20-year supply agreement with Japan's Kansai Electric for one million tonnes of LNG per year from 2016.
The CSG fields that the APLNG project aims to develop are in the Surat and Bowen Basins. A 323-mile (520-kilometer) gas pipeline will link the gas fields to the two-train LNG facility in Gladstone, Queensland.
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