Major player prioritising upstream

An aerial view of the Australia Pacific LNG project, which is 91 per cent complete.

An aerial view of the Australia Pacific LNG project, which is 91 per cent complete.

By Courtney Pearson

June 4, 2015

THE industry’s biggest players have not been immune to the commodity price downturn, prompting streamlining strategies to ride out the cycle.

One such company is Origin Energy – Australia’s largest integrated energy company – which recorded a drop in revenue for the March quarter, a downgraded Standard & Poor credit rating in April from BBB to BBB-, and a Baa2 (negative outlook) reaffirmed by Moody’s Investor Services.

Origin confirmed it would focus on exploration and prioritise upstream projects with the highest returns.

“Origin has, and will continue to, conserve cash flow, accelerate cost reductions and ensure capital expenditure is carefully focused on projects that will enhance cash flow and earnings in the near term,” the company stated.

“The revision of Origin’s credit rating to BBB- (stable) is not expected to have a material impact on the company.”

Origin’s current projects are in the Bass Basin, Otway Basin and Perth Basin and the Australia Pacific LNG (APLNG) project in South East Queensland.

The company reported a rise in production during the March quarter due to higher contributions from the massive APLNG project and the Kupe gas project in New Zealand.

The massive APLNG joint venture is 91 per cent complete and is already the largest producer of CSG in Australia.

APLNG

The upstream component of the $24.7 billion APLNG project is 93 per cent complete, and the downstream section is close behind at 89 per cent.

On completion, the Origin, ConocoPhillips and Sinopec joint venture will process 13,382 petajoules of 2P reserves and 16,155PJ of 3P reserves from gas fields in the Surat and Bowen basins.

Its LNG facility on Curtis Island will then process up to 9 million tonnes per annum through the first two gas production trains.

Origin stated that it was in a good position to continue funding the project despite its downgraded credit rating.

“Origin has more than sufficient liquidity to fund its expected remaining contributions to APLNG with maturities extending beyond [the] 2018 [financial year],” the company stated.

First gas arrived at the LNG facility in February, a significant milestone for the project which also marked the completion of commissioning the gas pipeline.

“The achievement of two major milestones, first gas to Curtis Island and completion of commissioning of the pipeline, demonstrates continued strong progress by Australia Pacific LNG and paves the way for the commissioning of the power generation facilities on the island,” APLNG chief executive Page Maxson said.

During the March quarter, the joint venture drilled 99 wells, comprising eight operated exploration/appraisal wells, two non-operated exploration/appraisal wells, one groundwater monitoring bore and 88 development wells.

So far, a total of 1069 development wells have been drilled and seven gas processing trains commissioned.

In late April the joint venture announced the successful start-up of the first of seven gas turbine power generators, which were designed to supply electricity to the Curtis Island LNG facility.

“Over the coming months we will progressively test and start additional critical elements of the processing trains to bring the LNG facility online and ready for first LNG export,” Mr Maxson said.

Each generator will produce a peak output of about 15MW.

“Australia Pacific LNG looks forward to completing the final phase of construction and delivering first LNG in mid-2015,” Mr Maxson said.

Sustained production from Train 1 is expected in the second quarter of the 2016 financial year, followed by Train 2 about six months later.

Seven gas turbine generators were successfully started up at the Australia Pacific LNG project’s facility on Curtis Island.

Seven gas turbine generators were successfully started up at the Australia Pacific LNG project’s facility on Curtis Island.

BassGas

Origin’s BassGas project is between Tasmania and Victoria in the Bass Basin and supplies gas for the domestic market.

It processes gas from the Yolla field at the Lang Lang onshore plant in Victoria, producing about 24PJ of natural gas per annum, as well as 1 million barrels of condensate and 75,000t of LPG.

As part of the project’s second stage, the Yolla 5 well was spudded mid-March and Yolla 6 reached total depth of 3653m at the start of May. The rig will move back to Yolla 5 to complete drilling.

Both wells are expected to be online this year.

“BassGas is expected to return to full and increased production when the Yolla 5 and Yolla 6 development wells enter into production during the 2015 calendar year,” an Origin Energy spokesperson said.

The joint venture began a BassGas Mid Life Enhancement project in 2011, which is expected to extend the life of BassGas.

BassGas began production in 2006 and is a joint venture between operator Origin Energy (42.5 per cent), AWE (35 per cent), Toyota Tsusho (11.25 per cent) and Prize Petroleum International (11.25 per cent).

The Yolla platform, part of the BassGas project.

The Yolla platform, part of the BassGas project.

Otway Basin

Origin is exploring off the coast of Victoria to add to its existing Otway Gas Project, which operates in joint venture in the Thylacine and Geographe offshore gas fields in Tasmania and Victoria, respectively.

The Speculant-1 well reached total depth of 4917m towards the end of January, encountering “potentially commercial quantities of gas in primary target Waarre Formation reservoirs” in the Otway Basin, about 3km offshore Victoria. The Speculant-2 appraisal well was spudded at the end of April, while Halladale-2 was completed nearly a week earlier.

The exploration wells are 100 per cent owned and operated by Origin Energy.

Perth Basin

Origin Energy and AWE are in joint venture for a number of permits in the Perth Basin, which Geoscience Australia said harboured commercial gas potential.

The two companies have an equal stake in the L1/L2 permits, operated by AWE, and Origin Energy operates EP320.

In February, the Senecio-3 exploration well “discovered potentially commercial quantities of gas in the primary target, and deeper secondary targets”, Origin stated.

At the start of May the joint venture announced it had discovered 149 billion cubic feet at the Irwin and Synaphea structures within the L1 and L2 permits.

Irwin was estimated to contain 15bcf of gas, while Synaphea was estimated to contain 2C resources of 134bcf.

A week after the announcement the joint venture spudded the Waitsia-1 appraisal well, the second of a three-well drilling program planned for the year, 3km east of Senecio-3.

Waitsia-2 will be drilled in the second half of 2015.

The joint venture is targeting early production from the initial phase of developments by mid-2016.

Renewable energy

Since 2000, Origin Energy has made investments in wind, geothermal, hydropower and solar technologies.

The company recently launched a national campaign to encourage customers to use the “power-generating potential of their roof space”.

It estimated that about 5.3 million houses nationwide were without solar power.

“To identify the number of potentially wasted roofs in Australia, Origin has subtracted the number of buildings in Australia with solar systems from the total volume of separate houses in Australia released by ABS 2011,” the company stated.

“These wasted roofs could be generating the equivalent of approximately $4.4 billion of electricity every year assuming a hypothetical scenario where they all installed solar.”

Origin Energy and Google teamed up to create the Rate My Roof app, which traces the user’s roof space through Google Maps and estimates the value of electricity their roof space could generate if it was covered in solar panels.

There are about 1.3 million solar systems installed on Australian rooftops.

Research conducted by the two companies suggested the perceived cost of installation was the biggest deterrent to switching to solar, with a quarter of respondents citing it as the main reason.