A consortium of investment groups is planning to acquire Origin Energy Ltd., Australia’s largest integrated utility, in a deal that could make ConocoPhillips upstream operator of the natural gas fields that feed the Australia Pacific LNG (APLNG) facility.
Brookfield Renewable Partners LP and U.S.-based institutional energy investor EIG reached an agreement with Origin’s board to pursue an acquisition for about $12.4 billion, the firms disclosed Monday. The deal is expected to be finalized sometime in early 2024, subject to regulatory and shareholder approval.
As a part of the deal, ConocoPhillips could acquire up to 2.5% of Origin’s stake in the APLNG joint venture and take over as operator of the assets in Queensland’s Bowen and Surat Basins, which supply coal seam gas to the liquefied natural gas facility near Gladstone.
“APLNG is currently the largest supplier of natural gas to Australia’s East Coast domestic market, meeting between 20-30% of its total demand,” said ConocoPhillips’ Andy O’Brien, senior vice president of global operations. “It will continue supplying customers in China and Japan with reliable energy that is lower in greenhouse gas intensity than other fossil fuel alternatives, and thus help meet energy transition pathway demand for years to come.”
Currently, ConocoPhillips holds 47.5% of the APLNG joint venture, along with Origin at 27.5% and China Petroleum and Chemical Corp., known as Sinopec, at 25%. ConocoPhillips is also the operator of the APLNG facility.
The majority of the 9 million metric tons/year (mmty) of LNG from APLNG are committed to Sinopec (7.6 mmty) and Kansai Electric Power Co. Inc. (1 mmty) until 2037, according to data from Kpler. A 0.28 mmty deal with ENN Energy Holdings is set to expire in 2024 with an additional five-year extension option with Origin.
Brookfield and EIG have been pursuing the acquisition of Origin since last fall. Under the agreement, Brookfield would acquire Origin’s energy markets business. EIG would take on Origin’s integrated gas business – including its 27.5% stake in APLNG – through its LNG unit, MidOcean Energy.
MidOcean Energy gained stakes in four Australian LNG facilities in October after EIG purchased Tokyo Gas Co. Ltd.’s interests in the Gorgon LNG, Ichthys LNG, Queensland Curtis LNG and Pluto LNG facilities.
EIG CEO Blair Thomas said that the continued supply of gas to Australia’s eastern market from APLNG would remain a priority for the partnership, but its exports to Asia also aligned with the group’s goal of accelerating decarbonization by diverting coal consumption.
“LNG will be critical in delivering energy transition targets, and this transaction is a compelling opportunity to accelerate EIG’s strategy of gaining exposure to high quality LNG assets around the globe,” Thomas said.
LNG exporters in the Queensland region have been under added pressure to guarantee gas volumes for domestic markets as Australia’s regulators forecast growing supply worries for its eastern and southern regions.
Earlier in the month, the APLNG partnership agreed to supply an additional 1.2 petajoules (PJ) of supply in an agreement with Energy Australia and Alinta Energy to help avoid possible shortfalls this winter. APLNG plans to supply around 130 PJ to domestic markets this year under existing agreements.
