Australia's Origin Expects Chinese LNG Buyer to Fulfill Contract
(Bloomberg) -- Origin Energy Ltd. expects China Petrochemical Corp. to fulfill its agreement to purchase liquefied natural gas from a A$24.7 billion ($19 billion) export project in Australia.
Origin sought to reassure investors Monday amid concern the Chinese company known as Sinopec Group may not want all the gas it agreed to buy under a long-term contract with the Australia Pacific LNG project. Sinopec Group also owns 25 percent of the venture.
The development with ConocoPhillips has begun offering the initial LNG production under short-term contracts, Sydney-based Origin said in a statement. Origin said there’s flexibility over when to begin supply to Sinopec Group, which has agreed to purchase 7.6 million metric tons annually. Two calls to Sinopec Group spokesman Lv Dapeng went unanswered.
Speculation has emerged that Sinopec Group may seek to resell gas from APLNG amid delays to construction of an import terminal. The slowdown in China’s appetite for commodities has been more severe than expected, according to UBS Group AG.
“Gas demand in China is not as strong as Sinopec envisaged, and it’s likely it would like to renegotiate the contract,” UBS analysts wrote in a June 26 report. “We think it unlikely that APLNG would ever agree to a revision of the contract and it is difficult to see Sinopec walking away from it.”
Origin fell as much as 3.9 percent to A$11.25 in Sydney trading, while the benchmark index dropped as much as 2.2 percent.
The Australia Pacific LNG project remains on track for “sustained” production from the first unit in the second quarter of the 2016 financial year, Origin said.
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