Origin Energy and ConocoPhillips to Spend US$25 bil. on Australian CBM-to-LNG Project

Moving forward

Australian domestic energy company Origin Energy and U.S. supermajor ConocoPhillips—which last October created a 50:50 joint venture (JV) called Australia Pacific LNG (APLNG) to develop Queensland's coalbed methane (CBM, also known as coal seam gas, or CSG) reserves as feedstock for a large-scale LNG export facility—have announced total investment for the project could be US$25 billion (A$35 billion). APLNG has Australia's largest CBM reserves with interests in the major production fields of the Bowen and Surat basins. APLNG project director, Todd Creeger said: "Our CSG-to-LNG Project is underpinned by a strong relationship between Origin and ConocoPhillips which are both leaders in the production of CSG and, in the case of ConocoPhillips, a leader in the delivery of LNG projects." Queensland's coordinator-general yesterday declared APLNG a "significant project", effectively streamlining environmental and other approvals. The co-ordinator-general's declaration will allow the draft terms of reference to be set for an environmental impact statement (EIS). Bloomberg reports that as many as 5,000 construction jobs and 1,000 permanent jobs will be created. The state assured the project of an accelerated approval process with Stirling Hinchliffe, infrastructure minister for the Queensland state government saying: "The Bligh government will do everything in its power to encourage an LNG industry and create jobs across Queensland, from our ports to the gas fields out west".

Outlook and Implications

The reported figure of US$25-billion investment is the maximum and is dependent on four full-scale production trains being constructed. However, the announcement is an important milestone for the project and will significantly contribute to the region's economy, create jobs, and drive further investment in Queensland.

Queensland's location makes it a great choice to develop the numerous planned CBM-to-LNG export projects, especially due to the low political risk and welcoming business environment as well as its experience of a large mining sector.

Last year ConocoPhillips stated it would pay Origin A$1.15 billion to carry Origin's share of costs to a final project investment decision, expected in 2010, while Origin managing director Grant King stated that front-end engineering and design (FEED) would begin this year. The LNG export project will see two trains producing 7million t/y each, with first LNG production scheduled for 2014. Should the project include four trains, trains 3 and 4 could begin producing LNG as early as 2015. If all four trains are operational the facility is expected to produce around 14–16 million t/y of LNG. Under the terms of the venture, Origin would be the upstream CSG operator and domestic gas marketer. ConocoPhillips would be the downstream LNG operator and oversee LNG marketing and shipping.

There would need to be considerable investment in the region's infrastructure to make the planned CBM-to-LNG project a reality with further development of APLNG’s CBM fields a priority, but also the construction of a gas transmission pipeline to the Queensland coast and a gas processing plant and associated facilities where the gas will be cooled and liquefied for shipping overseas.