Gas to help Origin's recovery: S&P

OREANDA-NEWS. Australian upstream and utility group Origin Energy had its credit ratings cut by ratings agency Standard & Poor's (S&P) to BBB minus, which is just one notch above junk status and a rating shared by other upstream groups following the sharp decline in oil prices during the past 12 months.

The ratings downgrade was also because of the subdued outlook for Origin's electricity business, which is competing in a market of power generation oversupply and falling to flat demand for grid-based power. But S&P said Origin's gas business will see an increased contribution to total earnings.

The gas business will be helped by rising gas prices and sales to other LNG projects at Gladstone, Queensland, S&P said. Origin is the upstream operator of the 9mn t/yr Australia Pacific LNG (APLNG) project at Gladstone in which it has a 37.5pc stake.

Origin has gas sales deals with the 8.5mn t/yr Queensland Curtis LNG (QCLNG) project operated by UK energy firm BG and the 7.8mn t/yr Gladstone LNG (GLNG) project operated by Australian independent Santos.

The decline in oil prices as Origin's financial commitments to the A\$24.7bn (\$19.2bn) APLNG project are still relatively high, S&P said. The APLNG project is forecast to start shipments in the second half of this year, which is also when GLNG will start exports. QCLNG started shipments in December last year.

Origin in February stated it still has A\$2bn of spending on APLNG before it becomes a self-funding project.