Origin Energy’s gas revenue soars on strong global demand
Booming international oil and gas prices drove another huge revenue boost for Origin Energy in the final three months of 2022, but calls are now growing for more gas to be sold to the domestic market where producers face new price caps.
Origin’s APLNG venture in Queensland, the largest gas producer on the eastern seaboard, posted a 42 per cent jump in sales revenue to $3.1 billion for the December quarter compared to the same time the prior year.
The company also revealed it had supplied three spare shipments of liquefied natural gas (LNG) into the North Asian spot market, where one-off cargoes were selling for historically high average prices above $US30 per million British thermal units during the period, boosting its sales revenue.
Queensland’s LNG industry is under pressure to do more to supply the local market. Last week, the Australian Competition and Consumer Commission (ACCC) renewed warnings of possible east-coast gas supply shortages later this year, noting that LNG exporters had ample uncontracted supplies to avert a domestic shortfall, but were yet to commit enough under “firm contracts” to local buyers.
APLNG, which Origin jointly owns with US-based ConocoPhillips and China’s Sinopec, was a significant east-coast gas supplier across the quarter, selling the fuel at an average local price of $6.31 a gigajoule – less than half of its average LNG price. APLNG supplies about 30 per cent of the east-coast gas demand each year.
“APLNG continued to be a major supplier to the domestic market, providing Australian businesses with 31.6 petajoules of gas during the quarter, at average prices well below those paid by international customers,” Origin chief executive Frank Calabria said.
However, representatives for industrial gas buyers in the manufacturing sector, where gas is needed for energy and as a feedstock, have stepped up calls for LNG giants to urgently strike more fixed-price supply deals and honour their commitments to the domestic market.
“There is clearly sufficient supply available in the market, but not all the available gas is being offered,” said Andrew Richards of the Energy Users Association of Australia, whose members include manufacturers such as Incitec Pivot, Qenos and Brickworks.
“We call on the gas industry to balance the national interest with the interests of their shareholders.”
The Albanese government last month passed emergency laws capping the price of domestic gas at $12 a gigajoule for the next 12 months in a bid to tame runaway gas bills, which Treasury had forecast could rise more than 40 per cent by next year. The government has also told producers it is developing a mandatory code of conduct to require them to sell gas at “reasonable” prices to local retailers and industrial users beyond the end of the year.
The industry remains anxious about potential grey areas in the new laws, which analysts at Credit Suisse have described as a “minefield of uncertainty” that raise the risk of unintended compliance breaches. The intervention has caused a slowdown in new gas sales agreements this month as companies seek assurances that their marketing activities will not violate the regulations.
Gordon Ramsay, an analyst with the Royal Bank of Canada, noted that higher LNG prices and the three spot LNG shipments had provided a boost to APLNG’s revenue for the quarter, while domestic sales volumes were 40 per cent lower than the previous quarter and domestic prices had fallen 49 per cent. Origin’s share of the joint venture’s quarterly revenue was $876 million.
Ramsay said APLNG’s production outlook had been lowered due to weather impacts, but said it should benefit from LNG “pricing tailwinds” for the remainder of the financial year.
Origin, meanwhile, is still facing a potential $18.4 billion takeover this year after Canadian asset giant Brookfield and US-based EIG lobbed a $9-a-share offer to buy the company and divide up its assets between them. EIG is seeking to buy Origin’s 27.5 per cent interest in APLNG, while Brookfield wants Origin’s energy generation and retail division, and has plans to invest another $20 billion to accelerate its roll-out of renewable energy by the end of the decade.
The bidding consortium is continuing to examine Origin’s accounts, although its exclusivity period has now passed. Origin did not mention the proposed deal on Wednesday.
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