Australia Pacific LNG and Sinopec Sign Binding Agreements for Further LNG Supply and an Increase in Equity to 25%

Monday, Jan 23, 2012

Australia Pacific LNG Pty Ltd (Australia Pacific LNG) and Sinopec have today signed an amendment to their existing LNG sales agreement for the supply of an additional 3.3 million tonnes per annum (mtpa) of LNG through to 2035 from Australia Pacific LNG’s world-class coal seam gas resources and LNG facility on Curtis Island, Gladstone in Queensland. The signing of this agreement finalises the marketing of the second train.

“The Sale and Purchase Agreement with Australia Pacific LNG is an important part of Sinopec’s energy portfolio, and will help us to ensure long term gas supply for the growing demand in the Chinese market.”

This agreement increases Sinopec’s existing purchase commitment from Australia Pacific LNG from 4.3 mtpa to 7.6 mtpa of LNG, representing the largest LNG supply agreement in Australian history.

The parties have also signed a Subscription Agreement for Sinopec to subscribe for additional shares in Australia Pacific LNG, which on completion will raise Sinopec’s ownership interest from 15 per cent to 25 per cent. As a result, ConocoPhillips’ and Origin Energy’s respective ownership interests will be reduced to 37.5 per cent.

The key commercial terms of the binding agreements announced today are consistent with the terms of existing LNG sales from the project and the Subscription Agreement signed with Sinopec in April 2011.

Chairman of Sinopec, Mr Fu Chengyu, said, “The Sale and Purchase Agreement with Australia Pacific LNG is an important part of Sinopec’s energy portfolio, and will help us to ensure long term gas supply for the growing demand in the Chinese market.”

ConocoPhillips’ Chairman and CEO, Mr Jim Mulva said, “Today is another important milestone for the Australia Pacific LNG project. Reinforcing the strong group of companies overseeing the Australia Pacific LNG project, we are pleased that Sinopec will have an increased shareholding of 25 per cent.”

Origin Energy Chairman, Mr Kevin McCann AM said, “The extension of the existing LNG sales agreement between Australia Pacific LNG and Sinopec represents the largest LNG supply agreement in Australian history and is testament to the scale and quality of the project. With the marketing of the second train now complete, Australia Pacific LNG is on track to make a final investment decision on the second train in early 2012.”

In April 2011, Australia Pacific LNG and Sinopec signed a sales agreement for 4.3 mtpa of LNG for 20 years from mid-2015 and a Subscription Agreement in which Sinopec subscribed for a 15 per cent equity interest in Australia Pacific LNG. The first train of the project was sanctioned in July 2011, followed by the signing of a binding Heads of Agreement with The Kansai Electric Power Company (Kansai Electric) in November 2011 for the sale and purchase of approximately 1 mtpa of LNG for 20 years from 2016.

The Subscription Agreement is subject to approvals by the Chinese Government and in Australia, the Foreign Investment Review Board and, along with the amendment to the sales agreement, is conditional on Australia Pacific LNG reaching a final investment decision on the second train.

These agreements will build on Australia Pacific LNG’s existing domestic business, which currently provides more than 40 per cent of Queensland’s existing natural gas requirements. The project stands to create thousands of jobs in regional Queensland and deliver significant opportunities for many of the local communities in which it operates as well as broader economic benefits.

Source: Business Wire

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