Australia Pacific LNG Gets Second Train

ConocoPhillips announced the sanction of development of a second 4.5 million tonnes per annum (MTPA) production train for its Australia Pacific LNG coal seam gas (CSG) to liquefied natural gas (LNG) project in Queensland, Australia.

“Sanctioning of the second train is the final step in the approval process for the project. From this point we are committed to the development and construction of all infrastructure and facilities to ensure the first delivery of LNG in 2015.” said Ryan Lance, chairman and chief executive officer.

LNG exports from the second train are scheduled to commence in early 2016 under binding sales agreements to Sinopec Corp. and Kansai Electric Power Company.

Sanction of the second LNG train includes the further development of related upstream gas gathering and processing infrastructure as well as the construction of the second production train by Bechtel.

The estimated gross capital cost associated with the second train is $6 billion, with a total two train project cost of $20 billion.

In April 2011, Australia Pacific LNG and Sinopec Corp. signed a sales agreement for 4.3 MTPA of LNG for 20 years from mid-2015 and a Subscription Agreement in which Sinopec Corp. subscribed for a 15 percent equity interest in Australia Pacific LNG.

The first train of the project was sanctioned in July 2011, followed by the signing of a binding agreement with Kansai Electric in November 2011 for the sale and purchase of approximately 1 MTPA of LNG for 20 years from 2016. An amendment of the existing sales agreement with Sinopec Corp. was signed in January 2012 increasing their LNG purchase to 7.6 MTPA.

With sanction of the second train, the agreement for Sinopec Corp. to subscribe to an increased equity interest in the Australia Pacific LNG joint venture is now unconditional with completion due to occur shortly. Sinopec Corp.’s ownership interest will increase from 15 percent to 25 percent, with ConocoPhillips’ and Origin Energy’s ownership interest each being reduced from 42.5 percent to 37.5 percent.

Origin Energy and ConocoPhillips previously agreed, subject to certain milestones, that final investment decision payments on the first two trains of the project will be deferred until ConocoPhillips achieves an agreed cash rate of return on its project investment, including acquisition cost. In accordance with that agreement, this project sanction defers ConocoPhillips' final investment decision payment of $500 million for the second train of the project.