Origin Energy today announced the company would be buying 40 per cent interest in two of Karoon Gas’s exploration permits in Western Australia’s Browse Basin. These permits contain large and prospective offshore gas fields, such as the Poseidon discovery.
Origin Managing Director, Grant King said, “Origin’s acquisition of a 40 per cent interest in the Greater Poseidon area will allow the company to establish a strategic position in one of Australia’s largest recent offshore gas discoveries at a competitive entry price when compared to recent transactions in the Browse/Bonaparte region.
“Poseidon is located in one of Australia’s most significant hydrocarbon regions and various options exist to monetise the gas through LNG export opportunities linked to growing demand in the Asian region.
“We welcome the opportunity to enter the joint venture alongside two significant global oil and gas companies, ConocoPhillips and PetroChina, with whom we share a common focus to maximise the value of Australia’s significant gas resources.
“The acquisition of these permits complements recent farm-ins in South Australia’s Cooper Basin and the Northern Territory’s Beetaloo Basin, thereby increasing Origin’s exposure to growing demand for natural gas both in Australia and overseas.
“We are mindful that the Australia Pacific LNG project begins production in mid 2015 and over the next two years there will be a significant increase in Origin’s long-term cash flow and earnings. It is important that we act now to invest in Origin’s continued development and growth through the latter part of this decade. We believe that acquiring these resources, when compared with greenfield exploration, substantially reduces the risk of securing opportunities to drive the long-term growth of Origin,” Mr King said.
Origin will pay US$600 million cash consideration with additional payments of US$75 million payable upon a project Final Investment Decision (FID) and US$75 million payable on first production. A further payment of up to US$50 million will be payable on first production if 2P reserves at the time of FID reach certain thresholds.
ConocoPhillips, the project operator, and PetroChina hold 40 per cent and 20 per cent interests in the permits respectively and also retain pre-emption rights for a limited period relating to the sale of Karoon’s 40 per cent interest in the Poseidon permits.
Origin will participate in the ongoing exploration and appraisal program – including the Pharos well which is currently being drilled by the joint venture – on a proportional basis to augment Poseidon’s existing resource position. Options to monetise the Poseidon field’s resources may include transporting natural gas to LNG production facilities in Darwin or through a standalone floating LNG facility.