Credit Suisse AGAIN

Last week Credit Suisse claimed that the Origin Energy/ConocoPhillips-run LNG project at Gladstone could come under threat amid speculation that Sinopec was attempting to renegotiate its APLNG deal because it was yet to complete construction of an import terminal in the southern Guangxi province to receive the gas.


Sinopec is contracted to take almost all of the 8.6 million tonne per annum output of APLNG, however the Asian gas market is in a glut and gas prices are falling.


Japan’s Kansai Electric is purchasing the balance.


Market watchers are concerned Sinopec could attempt to pressure Origin (37.5%) and ConocoPhillips (37.5%) to cap production from the Gladstone LNG projects, which is still to be commissioned.


This morning Origin noted the speculation about the 7.6MMtpa Sinopec supply agreement and said while the terms of the contract were confidential, it has confirmed that the sales and purchase agreement is structured as a take-or-pay agreement, which means Sinopec must pay for the gas even if it doesn’t use it.


“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,” Origin said in a statement.


“This is intended to occur after successful commissioning to ensure that the project can meet its obligations to supply cargoes under the SPA.”