(EnergyAsia, July 11 2012, Wednesday) — US ConocoPhillips and Australia’s Origin Energy Ltd said they have approved the expansion of their A$23 billion joint-venture with China Petrochemical Corp or Sinopec to export liquefied natural gas (LNG) from processing coal-seam gas (CSG) at a proposed plant in Queensland state.

Houston-based ConocoPhillips and Sydney-based Origin said the Australia Pacific LNG Pty Ltd consortium has agreed to build a second train to double the plant’s capacity, following on last July’s decision to proceed with the first train which is due to start up in 2015.

The expanded plant will have the annual capacity to export nine million tonnes of LNG, mostly for markets in Asia.

At the same time, the partners said state-owned China Petrochemical Corp or Sinopec has increased its stake in the project to 25% from 15% with immediate effect. The two founding partners will reduce their respective shareholdings below 37.5% each, with Origin stating its preference to retain a long-term stake of around 30%.

Australia Pacific LNG CEO, Page Maxson, said the announcement marks the final step in the approvals process for the CSG-to-LNG project.

“Substantial progress has already been made on our project in the gas fields, along the pipeline and at the liquefaction facility. With this final approval in place, we are on track to supply our customers with a cleaner-burning and reliable energy source,” Mr Maxson said.

In a statement, Origin said it would cover its project and finance debt service obligations with a US$35 per barrel break-even oil price, while US$50 oil over the project life would enable the recovery of its weighted average cost of capital on its estimated cash injection into Australia Pacific LNG.

Origin said Sinopec’s additional equity subscription provides Australia Pacific LNG with a net payment of US$1.4 billion for value determined as at January 1 2011. Adjusted for Sinopec’s expended share of capital since that date, the Chinese firm is injecting an estimated US$2.1 billion into the project.

Origin Energy managing director, Grant King, who is also Australia Pacific LNG chairman, said:

“As one of Australia’s largest LNG export projects, the Australia Pacific LNG project stands to deliver significant value to Origin shareholders and to Australia, as well as jobs for the Australian community.

“The incremental benefit of the second LNG train will strengthen the project’s already robust economics.”

In January 2012, Australia Pacific LNG and Sinopec signed binding agreements for the supply of an additional 3.3 million tonnes of LNG per year, bringing the total sales to the Chinese firm to 7.6 million tonnes. Australia Pacific LNG has also agreed to supply one million tonnes/year to Japan’s Kansai Electric Company.