APLNG flare August 2015
APLNG flare August 2015

Origin ready to cut costs at $25b Curtis Island LNG site

KNOWING it can run its Australia Pacific LNG venture at full strength for months, Origin Energy will now turn its sights to cost cutting at its Curtis Island gas export site.

The energy giant's half- year report details the completion of a 90-day financial test where its $25 billion Curtis Island venture ran 10% above capacity for three months successfully.

"We are committed to a step change in the cost structure and productivity (of APLNG) and we think that we're well placed to do that now," chief executive Frank Calabria told The Australian.

"We like the fact that we've been able to get that asset running very well and now it's our time to actually bring that down to make an economic return for our share-holders," Mr Calabria said.

The electricity and gas producer said in its first-half report for 2017 it had reduced net debt by $1billion to $8.1billion.

However, low oil prices continue to sting the energy provider.

This month Origin Energy wiped $1.2 billion off APLNG's value in one of several impairments announced in the report this week.

It is one reasons the project will cut costs.

"In response to the low oil price environment, Australia Pacific LNG is focused on improving productivity and significantly reducing its cost base by adopting a lean operating model, implementing advanced analytics and delivering well productivity improvements," the report said.

Neighbouring project GLNG, owned by Santos, also had a writedown of $1.1 billion this week.

Production from Australia Pacific LNG increased by 46% in the past six months, reflecting the start of the project's second LNG train coming online in October last year.

The report also noted APLNG's continued east coast gas commitment, where it meets about 20% of annual gas demand.

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