Australian LNG Project Secures $8.5 Billion Project Finance
05/23/2012| 10:47pm US/Eastern
--Export credit agencies, banks back US$20 billion LNG project
--Origin on track for plant expansion decision by mid-2012
(Recasts first paragraph, adds background throughout)
By Ross Kelly
Export credit agencies in the U.S. and China have joined over a dozen banks to offer US$8.5 billion to an Australian joint venture planning to liquefy unconventional gas for export to Asia.
The massive project finance deal underscores the promise that Asia holds for investors spooked by Europe's ongoing sovereign debt woes and a fragile U.S. economic recovery. Asian demand for cleaner-burning fuels such as natural gas is expected to rise rapidly due to rapid industrialization in China and India, and traditional buyer Japan plugs gaps in its energy mix in the wake of the Fukushima nuclear crisis.
Origin Energy Ltd. (>> Origin Energy Limited), ConocoPhillips (COP) and China Petrochemical Corp., or Sinopec, aim to spend US$20 billion building the liquefied natural gas, or LNG, terminal at the port of Gladstone in Queensland state. It would be capable of producing 9 million metric tons of LNG each year.
Sinopec has already agreed to buy 7.6 million tons a year and Japan's Kansai Electric Power Co. (9503.TO) has agreed to buy 1 million tons annually.
The venture is one of around a dozen LNG projects slated for Australia, four of which will be fed at Gladstone by gas trapped in coal seams hundreds of meters underground.
Coal seam gas has never been liquefied for export on a large scale and the sheer scale of the financing package underscores lender confidence that Origin's venture will be overcome technical and environmental challenges to have its plant ready for startup in about three years.
Origin said Thursday the US$14 billion foundation stage of its joint venture, called Australia Pacific LNG, remains on track for completion in 2015. A final investment decision on an expansion to two LNG production units, to cost an additional US$6 billion, is on track for mid-2012, it said.
"Australia Pacific LNG's ability to secure US$8.5 billion in project finance from Australian and international lenders evidences the strength and quality of the project," Chief Executive Grant King said in a statement.
Lenders include the Export-Import Bank of the United States and Export-Import Bank of China.
The 15 banks include Australia's big four lenders and offshore banks including HSBC, Mizuho, Bank of Toyko-Mitsubishi UFJ and Societe Generale.
-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; Ross.Kelly@dowjones.com