APA Group Releases Update on Orbost Gas Processing Plant
• Improvements to the Orbost Gas Processing Plant are on schedule
• The plant currently produces around 45TJ/day, the target being 68TJ/day
• The news has resulted in a slight uptick in share price
APA Group (ASX:APA) is an Australian natural gas and electricity supplier that boasts over 15,000km of pipeline and 4,100km of distribution networks as well as gas storage facilities, gas-fired power stations and wind and solar farms. They currently transfer more than half the natural gas used in Australia.One of APA’s assets is the Orbost Gas Processing Plant (OGPP) in Victoria, which the company acquired in October 2019. APA is working jointly with Cooper Energy (ASX:COE) to improve the plant’s operation and processing capacity. The companies have set a target capacity of 68TJ/Day.
On 6 April 2021, Cooper Energy released an operational and financial update to the market on the OGPP project. They have announced that the work on OGPP is progressing on schedule, performance is improving and expected to reach 45TJ/day in the near time. Though the plant is improving monthly, the company notes that there is still a long way to go. Reaching their goal capacity will require several more projects to be completed on the plant and require significant capital expenditure.
There are currently three projects under consideration to start on the OGPP. The work programs are all aimed at improving stability and increasing production rates. The initial cost estimate for these projects is approximately $24 million, and this cost would be shared between APA and COE as per an existing Transition Agreement between the two companies. Importantly, APA and COE will not be able to measure any improvements to performance until the projects are completed and the companies have a chance to review them.
The company also notes that additional capital expenditures might be required if they identify any further steps that could improve production. There is also currently an issue with OGPP foaming and fouling, which the companies have yet to find its cause. Also worth noting is that the plant will be taken offline for scheduled maintenance from 11-18 April 2021. During this time gas sales will still continue, with gas supply sourced from COE’s existing back up supply arrangements.
Prospects for APA at the moment are looking positive. The company reported solid financial performance in its 1H21 report despite challenging market conditions. CEO Rob Wheals points to this as proof of the company’s underlying strength and resilience. APA plans to increase capital expenditure by more than $1 billion over FY21-23.
The company recorded strong volume growth and in WA, NT and sections of the East Coast however this was offset by softer contract renewals and lower energy consumption in Vic. Operating cash flow was also up 1.4 per cent and the CEO predicts that APA will be at the forefront of a gas-led economic recovery with support from the Federal Government that will make up for any current shortfalls.