China Petrochemical Corp.,
Asia
’s biggest refiner,
agreed to invest an estimated $1 billion to increase its stake in an Australian
liquefied natural gas project led by ConocoPhillips (COP) and Origin (ORG) Energy Ltd.
Sinopec Group, as the
company is called, signed an initial accord to buy a further 10 percent of the
venture, Sydney-based Origin said in a statement today. Sinopec Group, which
agreed to pay $1.5 billion for 15 percent of the project in April, will also
purchase an extra 3.3 million metric tons of LNG a year through 2035, clearing
the way for an investment decision on the second phase of the $20 billion
Queensland
state venture.
China
,
the world’s largest energy consumer, plans to more than double natural gas
consumption to cut its reliance on coal and oil. The country needs to increase
LNG imports as it develops unconventional sources such as shale gas, said Ivor
Ries, an analyst at E.L. & C. Baillieu Stockbroking Ltd.
“There’s a lot of talk
about
China
seeking its own unconventional gas,” Ries said by phone today from
Melbourne
.
“What this tells you is that Sinopec thinks developing domestic supplies will
take a lot longer” than expected.
Origin gained 3 percent
to A$14.72 at the
4:10
p.m.
close in
Sydney
, while the
S&P/ASX 200 Index rose 1.2 percent.
Energy Assets
The accord comes a month
after Sinopec agreed to invest $5.2 billion in Galp Energia SGPS SA’s Brazilian
unit. Chinese energy companies have bid at least $16 billion for overseas oil
and gas assets this year to expand reserves.
Arrow Energy Ltd., the
Australian coal-seam gas producer owned by PetroChina Co. and Royal Dutch Shell Plc (RDSA),
is planning a rival LNG venture on
Queensland
’s
Curtis
Island
. BG Group
Plc (BG/) and Santos Ltd. (STO) are also building Queensland LNG
projects.
Origin and Conoco, the
third-largest
U.S.
oil company, are among energy companies in
Australia
planning or already building A$200 billion ($203 billion) of LNG
projects to tap Asian demand for the cleaner-burning alternative to coal. Their
venture last month agreed to supply
Japan
’s Kansai Electric Power Co. with 1 million tons of LNG a year.
While Australia is set
to surpass Qatar as the biggest LNG exporter by the end of the decade, projects
in the country face delays and cost overruns that threaten to undermine theircredit quality,Standard & Poor’ssaid in November.
Conoco and Origin
earlier this year agreed to supply 4.3 million tons of LNG a year to Sinopec. Annual
capacity from the first two stages of the LNG project will be 9 million tons.
Consistent Terms
The terms of the
agreement announced today are “consistent” with the previous Sinopec
transaction, Origin Managing Director Grant King told reporters on a call
today. Conoco and Origin may receive at least $1 billion by selling 10 percent
to Sinopec Group, Ries said.
Conoco and Origin will
each own 37.5 percent of the Australia Pacific LNG project, while Sinopec will
have 25 percent when the transaction is completed. The majority shareholders
reiterated today they plan to make aninvestment decisionon
the second phase of the development in early 2012 after committing to the first
processing unit in July.
“There is certainly
potential” to proceed with a third LNG unit, King said on the call today.
Origin doesn’t expect
delays amid concerns that coal-seam gas projects will harm the state’s water
supplies, King said. Origin, which followed BG and
Santos
in approving its
LNG development, expects exports from the first stage to begin in mid-2015 and
shipments from the second unit in 2016.