Sydney Morning Herald: Origin Energy's APLNG Project Faces Headache as Sinopec Said Unable to Take Gas

Serious doubts have arisen over the ability of the biggest customer for Origin Energy's $24.7 billion liquefied natural gas project in Queensland to take delivery of the gas, leading to speculation the Chinese buyer may seek to delay the start-up of the mega-venture and causing a hit to Origin's 2015-16 earnings.

The risks to the commercial stability of the Australia Pacific LNG project come just months ahead of the long-awaited start-up of the project, which has been in construction for the past four years and has stretched Origin's balance sheet almost to the limit.

Sinopec, which is contracted to buy almost all the LNG from APLNG, is said to have suffered delays to the import terminal it is building to receive the gas, while domestic demand elsewhere in China is too weak to be able to send it elsewhere.

As a result, Sinopec may seek to slow the ramp-up of production at the APLNG venture, or may put off starting to take commercial deliveries of gas, trade publications in Asia have reported. Or, Sinopec may instead secure approval from the APLNG venture to re-sell its gas into the weak Asian spot market for LNG, with the resulting losses potentially shared across the venture partners.

Production from APLNG is due to commence in the September quarter. MORE