2nd UPDATE: Origin Buys Coal Seam Gas Permit For A$660 Million
April 22 2009 - 2:05AM
Dow Jones News
Origin Energy Ltd. (ORG.AU), which plans to build a massive gas
export project with ConocoPhillips (COP), said Wednesday it has
bought coal seam gas assets in Queensland state for A$660 million
from local entrepreneur Paul Fudge.
Origin is dipping into its large kitty of cash reserves to buy a
100% interest in exploration permit ATP 788P from Fudge's Pangaea
group of companies.
Sydney-based Origin hit the money last year when it agreed to
sell half of its CSG assets to ConocoPhillips for up to US$8
billion. The two also formed a joint venture to build a liquefied
natural gas plant to be fed with CSG at Gladstone on the Queensland
coast.
Origin's deal with Fudge is the sixth significant one in
Queensland's CSG sector, which is attracting interest from
multinationals and local partners keen to tap high projected Asian
demand for cleaner-burning fuels.
The terms of the agreement with ConocoPhillips means the equal
LNG joint venture has an option to buy the newly acquired CSG
assets from Origin, essentially leaving it with a 50% stake. Origin
Chief Executive Grant King said the JV hasn't yet indicated whether
it will exercise its option within the agreed 30-day time
limit.
Origin expects the acquisition will help it book an extra 1,150
petajoules of proved, possible and probable CSG reserves by June
30. These could either feed the LNG project or generators in the
domestic market, where Origin is trying to boost its market share,
King said.
Fudge, a former fabric trader, received 57 cents per gigajoule
of CSG, which King said reflected the high quality of his acreage.
That's about 15-20 cents a gigajoule higher than recent CSG
transactions on a similar scale, including BG Group's acquisition
of Pure Energy Resources and Arrow Energy's purchase of Beach
Petroleum's CSG interests.
King explained that the permit is next to proven CSG fields in
the "sweet spot" of Undulla Nose in Queensland's Surat Basin,
characterized by high gas content, permeability and a more
accessible resource.
Responding to growing concerns from analysts that its LNG plans
could be delayed, King said there is no doubt that a global
economic slowdown has made it significantly harder to find markets
for LNG. But demand still exists for quality ventures with adequate
reserves, he added.
Origin and ConocoPhillip's is one of three large-scale
CSG-to-LNG projects planned for Gladstone and one of about a dozen
LNG projects planned for the region.
ConocoPhillips, responsible for marketing, is currently talking
to potential customers, King said.
"In our view, there's no question there's room for further LNG
to be contracted long term, particularly into the Asia Pacific
market," King told reporters on a conference call.
"But the pressure for buyers to contract sooner rather than
later is less." Origin and ConocoPhillips want to make a final
investment decision on their project by late next year.
Origin still has plenty of capacity on its balance sheet to make
acquisitions and has indicated it will be interested in the retail
energy assets of New South Wales state, which the government plans
to privatize by the end of the year.
King said Origin is still interested in buying Woodside
Petroleum Ltd.'s interest in the Otway gas project offshore
Victoria state. "We will look at it closely and we will value it as
best as we can," he said.
He wouldn't rule out buying more CSG assets in Queensland, but
noted that while there is still plenty of available acreage there,
the number of assets mature enough to confidently assess reserves
levels is "clearly diminishing".
By Ross Kelly, Dow Jones Newswires; 61-2-8235-2957;
ross.kelly@dowjones.com
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