Australia’s AGL Energy said Thursday that exploration and production of natural gas assets will no longer be a core business for the company due to plunging oil and gas prices.
AGL is pulling out of its coal seam gas business in Australia, ceasing its exploration and winding down or selling its operational gas fields.
AGL, that in December signed a deal to provide feed gas for the Santos GLNG plant, said it expects to recognise “an impairment charge of $640 million after tax ($795 million pre-tax) against the carrying value of its gas exploration and production assets including an increase in rehabilitation provisions“.
The two major drivers of the impairment charge have been the fall in global oil prices with consequent effect on long-term Queensland gas prices and Waukivory Pilot well data indicating lower than expected production volumes for the Gloucester gas project, AGL said.
AGL has impaired its Queensland natural gas assets at Moranbah, Silver Springs and Spring Gully. Apart from gas storage and related plant at Silver Springs, AGL expects to sell these assets.
“Due to difficult market conditions this may take some time. It is likely that the sale of Moranbah will require a cash payment in relation to onerous contract provisions previously booked,” the company said.
In New South Wales, AGL will not proceed with the Gloucester gas project and will cease production at the Camden gas project in South West Sydney in 2023, twelve years earlier than previously proposed.
AGL has completed the business case for the Gloucester Gas Project which incorporated “disappointing gas flow data” from the Waukivory Pilot wells and economic modelling of the gas resource.
“Unfortunately, the economic returns to support the investment of approximately $1 billion were not adequate. Consequently, in the interest of our shareholders and customers, this is the most responsible course of action,” the company said.