Australia's Origin locks in domestic gas supply tied to Asian LNG price

Australia's Origin Energy said on Wednesday it has lined up a four-year natural gas supply deal with Australia Pacific LNG (APLNG) starting from 2022 that could help fill a shortfall looming in the country's southern states.

Pricing for the 91 petajoules of gas will be tied to the Japan Korea Marker benchmark price, Origin said, which is typically used for spot liquefied natural gas (LNG) cargoes in Northeast Asia and not for domestic purchases.

"Origin has taken a major step towards securing gas supply for domestic customers, particularly in southern states, through a period in which (the Australian Energy Market Operator) has identified a potential shortfall for the market," Greg Jarvis, Origin's energy supply general manager, said in a statement.

APLNG, which produces gas in the northeastern state of Queensland for the domestic market and for export as LNG, will ramp up volumes for Origin during Australia's winter months, when household heating demand shoots up in the southern states, the companies said.

The Australian winter coincides with periods of low LNG demand during northeast Asia's summer.

Origin has also lined up extra pipeline capacity under a three-year deal with APA Group starting in 2023, which will allow the company to transport large amounts of gas to southern markets where it is needed.

With that deal in hand, APA said on Wednesday it would go ahead with a A$270 million expansion of its network from Queensland to the southern market.

Origin had considered buying gas through an LNG import terminal planned by Australian billionaire Andrew Forrest's Squadron Energy at Port Kembla in New South Wales.

Squadron was not immediately available to comment on what impact Origin's decision would have on the Port Kembla project.

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