Gas no longer works for AGL, one of Australia’s biggest electricity generators and retailers.
The company has decided that gas production and exploration are no longer a part of its core business because of volatility in commodity prices and long development lead times.
It announced a $795 million impairment, about $640 million after tax, against gas assets.
Part of the shift in policy means that the Gloucester coal seam gas project, which faced intense opposition from rural communities in New South Wales, will not go ahead. The Wilderness Society called on Santos to follow AGL’s lead and drop its coal seam gas plans in NSW.
There is no change to AGL’s commercial or retail gas activities.
AGL last year announced it is is moving toward a fossil-fuel free business and won’t be building any more coal-fired power stations. Part of this process includes a forecast $1 billion in asset sales and cost cuts of $200 million.
The company is working on a vision of the near future where energy markets will be transformed by decentralised products and services, including solar panels, battery storage, connected appliances and smart grids.
Today AGL says it’s confident it has enough gas for its residential and small business customers following a contract with the Gippsland Basin Joint Venture and the planned expansion of the Eastern Gas Pipeline.
CEO Andy Vesey says the company will focus on its core competencies, transforming the business to capitalise on the evolution in the energy sector and to meet the rapidly changing needs and expectations of customers.
He says the economic returns to support the investment of about $1 billion the Gloucester gas project weren’t there.
AGL will relinquish its petroleum exploration licence for the Gloucester region to the NSW Government and will now start a comprehensive decommissioning and rehabilitation program for its well sites and other infrastructure.
“Exiting our gas assets in New South Wales has been a difficult decision for the company,” says Vesey.
“AGL has invested significantly in these projects and communities over the past seven years for the Gloucester Gas Project, and 10 years in the case of the Camden Gas Project.”