Origin Energy has signed a preliminary agreement with China’s ENN LNG Trading company to supply gas for a five-year period.
Origin plans to supply ENN with half a million tonnes (MTPA) of liquefied natural gas per annum, starting in 2018 or 2019, after the Chinese company completes its receiving terminal in Zhejiang province.
Both parties have the option of extending the agreement by another five years.
The Australian gas and power retailer said the export deal was outside its Australia Pacific LNG (APLNG) business, and the supplies are likely to be sourced from its own undeveloped resources or third-party purchases.
“Origin, together with its partners, has the option to bring forward the development of its resource positions on Australia’s east coast,” it said, adding that its Ironbark coal seam gas field in Queensland can be developed to supply gas for ENN.
In that case, Origin would need to sign a tolling agreement with one of the three existing LNG plants in Queensland to use their existing infrastructure.
“The heads of agreement represents a significant milestone in the relationship between Origin and ENN, and in the development of Origin’s LNG business,” David Baldwin, the head of Origin’s gas business said.
Origin has sharply cut capital expenditure in recent months as it responds to a slide in oil and gas prices and bolster a balance sheet that has been stretched by the development of the giant APLNG project.
The nine million tonnes per annum APLNG project, which is a joint venture with ConocoPhillips and Sinopec, flagged off its first export shipment in January.
ENN’s parent company is one of the largest natural gas distributors in China, with more than 11.3 million residential and 52,000 industrial and commercial customers.
In January, ENN signed a similar agreement to buy LNG from Chevron’s Gorgon LNG project in Western Australia.
Origin’s shares closed 16 cents, or 3.61 per cent, higher at $4.59.