Conoco Phillips ships first LNG from Australian mega project

Conoco Phillips ships first LNG from Australian mega projectHOUSTON January 11, 2016 — The first cargo of liquefied natural gas has sailed from the mammoth Australia Pacific LNG facility in Queensland,  ConocoPhillips and its partners in the project announced early Monday.

The shipment, carried on the 935-foot meter tanker Methane Spirit and bound for customer in Asia, is among the first in a wave of liquefied natural gas projects that are coming online even as low oil prices have dragged down the value of natural gas on the international markets they serve.

For the companies behind it, the cargo is an important first step toward the project transitioning from a cash-sink to cash-generator after years of construction and more than $17 billion in investment.

Houston’s ConocoPhillips and Australia’s Origin Energy each own a 37.5 percent stake in the venture, and China’s Sinopec owns the remaining 25 percent and is its largest customer. Kansai Electric Power, a Japanese utility, has also signed contracts for some shipments.

The Australia Pacific LNG, or APLNG, facility takes coal seam gas from Eastern Australia, liquefies it and then ships the fuel to customers in Asia. Monday’s shipment sailed from the first liquefaction train, and a second is due online in the second half of 2016.

The project’s backers began construction of the facility in 2011 hoping to capture the margin between cheap U.S. natural gas and more expensive intentional gas, which is often linked to oil prices. However, the oil bust has depressed natural gas prices abroad and left immediate profitability of APLNG uncertain — Origin has said it needs between $38 and $42 per barrel international oil before it sees positive cash flow from its investment, according to the Sydney Morning Herald.

Still, the project’s backers have continued to pour billions into the project’s construction even as their budgets were crimped by low oil prices and the large investment weighed on their balance sheets.

ConocoPhillips said in a statement that an operational APLNG would allow it more financial flexibility moving forward. The independent oil and gas producer expects the project to be self-funding after the second train comes online later in 2016.

“This is a significant milestone for our company and we are proud to have safely loaded the first cargo from APLNG,” said Ryan Lance, chairman and chief executive officer, in a written statement.

APLNG’s first shipment comes as another Houston company, Cheniere Energy, is set to receive its first tanker at the $18 billion natural gas liquefaction and export terminal the company has built at Sabine Pass in Cameron Parish, Louisiana.

That tanker, the 290-meter Energy Atlantic, last reported a position of about 50 kilometers off the Louisiana coast. It could soon become the first ship to depart the mainland U.S. carrying a cargo of American liquefied natural gas.

Cheniere Energy didn’t respond to a request for comment on Monday.

Source: Robert Grattan Fuel Fix