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Origin’s APLNG Project 45% complete

Origin Energy (ASX: ORG) has provided the market with an update regarding its huge Australia Pacific LNG (APLNG) project that will please investors but also reminds them that there is still a long way to go.

The APLNG is a joint venture between Origin, ConocoPhillips and Sinopec to develop coal seam gas (CSG) in Queensland’s Surat and Bowen basins. After the gas is extracted from the basins it will be piped 530 kms from the gas fields in southwest and central Queensland to Curtis Island, which is off the coast of Queensland near Gladstone. At Curtis Island, an LNG facility is being developed to process up to 9 million tonnes of LNG per year.

The update confirmed that both the upstream and downstream components of this APLNG project are now 45% complete. The company also took the opportunity to release its Annual Reserves Update and Quarterly Production Report.

Reserves

Pleasingly, APLNG’s total Proved and Probable (2P) reserves increased by by 2%. The increase in 2P reserves is all the more important for Origin given its diluted ownership of the APLNG project. Origin’s share fell from 42.5% to 37.5% during the financial year 2013, which when other adjustments are included saw Origin’s overall 2P reserve reduce by 607 PJe on the prior year to a total of 6201 PJe.

Production

Production recorded a 5% fall in output compared with 2012, however when put in context of the dilution at APLNG, the suspension of operations at Kincora gas plant and natural field decline in the Cooper Basin this outcome was reasonable. Partially offsetting the production declines were increased production rates from the Otway and Bass basins. Luckily the lower production was counterbalanced by higher average prices which led to flat overall sales revenue.

Foolish takeaway

It is an interesting time in the gas space at the moment with issues surrounding the sector becoming increasingly politicised. While this does create a level of uncertainty for investors, the long-term demands for energy are clear which makes major projects such as APLNG of particular interest.

Investors looking for opportunities in the energy space should also consider the merits of the Papua New Guinea LNG (PNG LNG) project which is a co-venture between Exxon Mobil and a number of Australian listed firms including Oil Search (ASX: OSH), Santos (ASX: STO) and AGL Energy (ASX: AGK). For the largest direct exposure to this project, Oil Search is the best investment vehicle.

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Motley Fool contributor Tim McArthur owns shares in Origin Energy.

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