ENERGY company AGL will cease all exploration and production at its controversial Gloucester coal seam gas project, citing poor economic returns from the gas resource.
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Following a strategic review of its operations, AGL said its gas producing assets were no longer a core business, which includes retail electricity and solar energy production.
In an announcement on the Australian Securities Exchange this morning, AGL said the return on the companies’ $1 billion investment in Gloucester offered insufficient value for shareholders.
The Gloucester project, which could have supplied up to 15 per cent of NSW gas demand, has faced significant opposition from sectors of the Gloucester community, but also found support among some farmers.
The company will relinquish its petroleum titles to NSW Government and begin a decommissioning and rehabilitation project.
It will establish a $2m trust fund and work with the Gloucester community to identify investment options.
AGL also said it would cease operations at the Camden gas project 12 years early than previously stated, winding up in 2023. Camden is NSW’s only producing gas field.
The company announced an impairment charge of $640 million after tax against the carrying value of its gas exploration and production assets including an increase in rehabilitation provisions.
The company also said it expects to sell its Queensland gas assets including Moranbah, Silver Springs and Spring Gully, which had been written down in value.
Rehabilitation, redundancy and associated costs are expected to be less than $10m.
AGL expects to cop an impairment charge of $640 million after tax against the carrying value of its gas exploration and production assets.
The company said major drivers of the impairment charge were the fall in global oil prices and Waukivory pilot well data indicating lower than expected production volumes for the Gloucester project. There will be no change to AGL’s commercial or retail gas activities.
Santos is pursuing NSW’s last remaining gas project, in the Pilliga forest at Narrabri.
A Santos sposkesperson said today the company remains its Narrabri project.
“In NSW, more than one million homes, 34,000 small business and the jobs of more than 300,000 NSW workers rely on an affordable supply of natural gas,” the spokesperson said.
“The development of local gas resources will be critical to achieving a supply/demand balance in the future, as the 5 per cent of gas produced in NSW (at Camden) is withdrawn over the coming years.”
