July 15, 2020 Read More →

Global LNG woes force Australia’s Origin Energy to take $1.2 billion write-down

Renew Economy:

Origin Energy is set to wear up to $1.2 billion in write-downs as a result of a collapse in global gas prices, as the company assesses the impacts of a Covid-19 affected economy on its LNG investments and as the massive write off of global fossil fuel assets has its impact in Australia.

In a statement to the ASX, Origin Energy said that it had been forced to write down the value of two of its LNG investments, after it was caught out by a sudden collapse in global gas prices.

It’s a substantial impairment for one of Australia’s largest energy companies, and undermines arguments being made within the Morrison government that Australia’s needs to embrace the gas industry to lead the Covid-19 economic recovery.

Industry analysts have warned that the Morrison government’s embrace of gas has been ill-advised, and fresh financial losses from Origin provide an indication of how much the gas sector itself has suffered from a Covid-19 triggered drop in energy consumption.

Origin said that it expected to write down the value of its 37.5 per cent stake in Australia Pacific LNG by between $720 and $770 million, blaming the collapse in global oil and gas prices for the loss.

Origin’s investment in the gas joint venture had assumed a prevailing oil price of US$60 per barrel. However, prices have traded well below US$45 per barrel for most of 2020 due to the combined impacts of Covid-19 caused reductions in demand and a Russian-OPEC oil price war. With much of the Asian gas market tied to global oil prices, the oil price collapse had direct flow-on impacts for the value of gas exports from the Australia Pacific LNG joint venture.

[Michael Mazengarb]

More: Huge Origin write-down raises questions over Australia’s gas transition plan

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