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Coal seam gas takes a hit as Origin cuts up to $400m from spending

Business

Origin will cut up to $400 million from its spending in the Queensland coal seam gas fields next financial year as it deals with the changes forced on the APLNG joint venture from COVID-19 and its economic impacts.

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The reduction will result in a reduced development activity as well as lower exploration and appraisal but was not expected to materially impact production in 2021.

It said a small number of discretionary projects have also been paused and Origin said the decision would not impact its workforce. It would not comment on the impact of contractors, but said it “remained committed to sharing economic benefits in the local communities where we operate”.

Origin also said the cuts should not be viewed as a cancellation of work, but a deferral. It also cautioned against suggesting that the cutbacks would have an impact on regional Queensland economies.

Its exploration program in the Beetaloo Basin, in the Northern Territory has also been paused due to COVID-19.

The project has stirred up activists because of its potential carbon emissions.

However, its APLNG project remained robust.

Origin said APLNG’s operating costs were predominantly in Australian dollars and long-term LNG offtake contracts are in US dollars, the impact of lower oil prices is partially mitigated by a lower AUD/USD exchange rate.

Based on a combination of targeted reductions in expenditure, the nature of the long-term LNG contracts and a 60 cent AUD/USD exchange rate, Origin estimates that Australia Pacific LNG can fund its FY2021 operating, development and project finance costs at oil prices at or above $US25 a barrel.

Origin’s FY2021 Australia Pacific LNG-related oil hedging program consists of 3.1mmbbl fixed at A$90 per barrel and 0.4mmbbl fixed at US$57mmbbl.

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