Origin Energy managing director Grant King has declared that...

Origin Energy managing director Grant King has declared that both a demerger and potential mergers are "on the table" as the electricity and gas supplier considers options to help restore shareholder value.

Speaking on the sidelines of an event to mark the start-up of the $25 billion Australia Pacific liquefied natural gas project in Gladstone, Mr King said many of the potential corporate moves being suggested in the market had their merits but all involved complexities.

"We've not ruled anything out, nor are we saying we favour that or we favour that, other than acknowledging there is merit in all of those decisions," Mr King said. "The reality is they all have their complexities and ...most importantly they all take time."

The various options would also require "like-minded people" to go ahead, for example banks in the case of a demerger, or other companies.

The comments come as some investors suggest that a demerger between Origin's core energy markets business and its growing oil and gas business is a natural next step for Origin once the APLNG project is fully on stream and reaches technical completion in about 12 months' time. Some analysts such as Credit Suisse have even suggested that a full merger between Origin's oil and gas business and Santos makes sense.

The APLNG venture, in which Origin is partnered by ConocoPhillips and China's Sinopec, has now shipped six LNG cargoes from its first production line, with construction continuing on the second, which is slated to begin production toward the end of the September quarter.

While the timing for the start-up of the first and second trains has slipped several weeks from expectations 12 months ago, Mr King said that plus or minus a few weeks made little difference to the economics of the project.

The structure of the plant construction contract with Bechtel means that risks around increased costs if the second train runs late lie with the US private engineering firm, not with the APLNG partners. A penalty clause for Bechtel is understood to kick in some time later this year if construction is not complete.

Speaking at the event at the LNG plant site on Gladstone's Curtis Island, Sinopec's senior vice president Zhigang Wang pointed to "severe challenges" to the APLNG project in the short term due to very low oil prices but said the company remained optimistic of the venture's long-term value.

Sinopec, which is the venture's biggest customer as well as a 25 per cent equity owner, hopes the second production line will be brought into production on schedule and measures taken in the venture to "improve shareholder value," he said, speaking through an interpreter.



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