Energy giant AGL has made a decision to cut its losses in the troubled coal seam gas sector, announcing that it will end all exploration and production of natural gas.
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The Australian energy company said in a stock exchange filing that it had decided exploration and production would no longer be a core business after reviewing its operations.
Primarily due to the fall in long-term Queensland price forecasts, AGL has impaired its Queensland natural gas assets at Moranbah, Silver Springs and Spring Gully.
The company has also put the brakes on at Camden, on Sydney’s south-western fringe, where production from existing wells will continue only until 2023, twelve years earlier than planned, with rehabilitation works to be carried out progressively during that time.
The company will abandon projects in the states of Queensland and New South Wales, absorbing an expected pre-tax write off of A$795m ($570m; £391m).
AGL has invested significantly in these projects and communities over the past seven years for the Gloucester Gas Project, and ten years in the case of the Camden Gas Project.
Australia’s biggest power producer, on Thursday abandoned its Gloucester coal-seam gas project in New South Wales, saying it can’t justify the A$1 billion ($717 million) investment.
It said the impairment charge would have a minimal cash impact on its full year results.
AGL had projected the gas project at Stratford, about 100km north of Newcastle, to deliver more than 15 per cent of the state’s gas needs by 2018.
Greens mining spokesperson Jeremy Buckingham welcomed the “wonderful and smart strategic decision by AGL to get out of a fossil fuel that was floundering in the face of community opposition”.
“This decision shows that a social licence is necessary to operate in a community”.
There is large public support to stop coal seam gas (CSG) projects going ahead, and the NSW state government has ruled large areas of land off-limits for CSG drilling, including potential for those zones to be expanded.
The Herald reported in November that Gloucester Shire Council had asked Premier Mike Baird to buy an exploration licence back from the company.
AGL had long argued the project would keep energy prices affordable, create jobs and promote economic development.
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“AGL is confident that it has sufficient gas for its residential and small business customers following the recent contract with the Gippsland Basin joint venture and the planned expansion of the Eastern Gas Pipeline”, the company added.
