No Origin deal without guaranteed cheap local gas

Another big LNG takeover in the offing:

The nation’s energy market is set to be radically reshaped again as electricity giant Origin Energy gives its early blessing to a monster $18.4bn takeover bid led by one-time AGL suitor Brookfield.

Canada’s Brookfield has ambitions to fast-track the shift to green energy through Origin and has committed to a $20bn spending plan in the next few years to power-up renewable generation and storage across Australia.

…The takeover stands to see the split of Origin between its electricity generation and retail business and its Queensland-based LNG-export operations.

In doing so, this unwinds the integrated structure which for years Origin has insisted provided it with protection from the wild swings in the Australian electricity market.

…The other leg of the planned takeover would see Origin’s massive LNG export business will be hived off to US energy investor MidOcean Energy, which is quickly becoming a key player in the Australian market.

…MidOcean, owned by $63bn Washington-based energy investor EIG, recently became an influential player in Australian LNG with a US$2.1bn deal which secured stakes in a portfolio of LNG assets including WA-based Gorgon, Ichthys and Pluto as well as Queensland’s Curtis LNG.

Critically, MidOcean’s parent EIG will effectively become the equal biggest player in Australian Pacific LNG alongside ConocoPhillips.

In other news this morning:

Dan Clark, president of ConocoPhillips Australia – a subsidiary of the US oil and gas giant of the same name – left open the prospect the multinational could use ISDS provisions against Australia, but said without specific detail it was not yet possible to fully consider trade agreement implications.

Do we want to swap out ORG for US private equity when, alongside it, listed US oil is threatening to sue Australia if it keeps enough of its own cheap gas for itself? Only if we are stark raving mad.

Conversely, this is a terrific opportunity to force a partner in both QCLNG and APLNG to adhere to new rules as it joins the cartel.

Those rules should be very clearly articulated by the ACCC as a condition of the takeover and must guarantee Australia access to its own cheap gas for as far as the eye can see.

Otherwise, no deal.

P.S. Not a lot of “sovereign risk” apparent in the $18bn offer…