AGL has announced it will no longer carry out operations in gas production and exploration, and will exit its gas assets.
The decision comes after a major review into the business’ operations.
“[AGL] has taken a strategic decision that exploration and production of natural gas assets will no longer be a core business for the company due to the volatility of commodity prices and long development lead times,” it said in a company statement today.
AGL managing director Andy Vesey said the company will focus on its core competencies, “transforming the business to capitalise on the evolution occurring in the energy sector to meet its customers’ rapidly changing needs and expectations.”
The decision will not affect its commercial or retail gas activities, however it will cause a pre-tax impairment charge of $795 million against the carrying value of its now non-core assets.
Regarding its assets in Queensland, AGL has impaired its Moranbah, Silver Springs, and Spring Gully assets.
“Apart from its gas storage and related plant at Silver Springs, AGL expects to sell these assets,” the company said.
However, “due to difficult market conditions this may take some time.”
It went on state that the sale of Moranbah will require a cash payment “in relation to onerous contractor provisions previously booked”.
The decision will see AGL not go ahead its embattled Gloucester Gas project, and case all production at the Camden gas project in 2023 – a full 12 years earlier than previously slated.
Regarding its decision at Gloucester, AGL explained that “unfortunately the economic returns to support the investment of approximately $1 billion were not adequate”.
AGL will abandon its exploration licences in the Gloucester region and carry out a decommissioning and rehab program for its well sites.
“Exiting our gas assets in NSW has been a difficult decision for the company,” Vesey said.
“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.”
It will establish a $2 million Independent Trust Fund and work with the Gloucester community to create ongoing economic benefits for the region.
The decision has been welcomed by the Greens, with NSW Greens mining spokesperson Jeremy Buckingham stating,"This is a wonderful and smart strategic decision by AGL."
"This decision shows that a social licence is necessary to operate in a community. Coal seam gas is opposed by the vast majority of people and coal is rapidly losing its social licence to operate in NSW."