Origin, ConocoPhillips secure key CSG project loan facility

Origin Energy Ltd., Sydney, and ConocoPhillips, both joint-venture partners in the Australia Pacific LNG coal seam gas-LNG project at Gladstone in Queensland, have secured a $8.5 billion loan facility from a syndicate of international banks for the downstream segment of the development.

The banks include Australia & New Zealand Banking Group Ltd., Bank of China Ltd., Societe Generale SA, and Bank of Tokyo-Mitsubishi UFJ Ltd. The documentation has been signed for a 16-17-year loan period. The draw down on the facility will be made progressively over the construction phase of the project.

The facility is contingent on the APLNG JV reaching a final investment decision on the second train of the project on the Curtis Island site near Gladstone.

Grant King, Origin managing director, hailed the loan facility as another milestone which paved the way for the development of one of Australia’s largest LNG export projects.

King said the ability of the partners to secure the loan is proof of the strength and quality of the project.

The multibillion dollar figure includes a $2.9 billion loan secured rom the US Export-Import Bank at the beginning of this month.

King played down fears that the JV was expecting cost blowouts for the project that have arisen following the announcement early in May that the BG Group’s project, also on Curtis Island, has suffered a $5 billion (Aus.) overrun.

King says he is confident the APLNG project schedules and budgets have been based on a solid understanding of current regulatory requirements and the cost environment. The project is expected to remain on schedule and budget to deliver first gas in 2015.

Last year the APLNG committed $14 billion to the first phase of the project which comprises development of the first 4.5 million tonne/year LNG train on Curtis Island along with infrastructure to support the second train. Gas will be supplied from Origin’s CSG fields in the Bowen/Surat Basins in southeast Queensland.

The first train is underpinned by a binding 4.3 million tpy LNG offtake agreement with Sinopec of China. Part of this deal specifies that for a consideration of $1.5 billion Sinopec will become a 15% equity owner in the project, thus reducing ConocoPhillips and Origin stakes to 42.5% each.

This second plant is expected to cost another $6 billion and take production capacity to 9 million tpy. A final investment decision is expected before the end of June.

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