AGL is to quit the Australian coalbed methane sector (CBM: called coal seam gas in Australia) after a strategic review of the company’s CBM business commissioned by new Managing Director and CEO, Andy Vesey.
“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,” the company said in a statement.
As a result the company will include a post-tax impairment charge of AUS$640 million against the value of its gas exploration and production assets in its financial results for the six months ending December 2015. “The impairments has minimal impact on FY16 underlying profit,” added the company.
“The two major drives 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 Projects,” the company concluded.
As a result, ASL will not proceed with the Gloucester Gas Project and cease production at the Camden Gas Projects – both in New South Wales.
“Exiting out gas assets in New South Wales has been a difficult decision for the company,” said Vesey. “ASG 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.”
The company also said it would sell its Queensland gas assets in Moranbah, Silver Springs and Spring Gulley – although the sales process may take some time, it admitted, due to the current difficult market conditions.
The announcement was welcomed by New South Wales Greens mining spokesperson, Jeremy Buckingham, who called it a “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.”
And as a nod to that “social licence”, AGL said it would establish an AUS$2 million Independent Trust Fund to identify investments options to deliver ongoing economic benefit to the Gloucester community. “We remain committed to leaving a positive legacy in these regions,” said Vesey.
Edited by Jonathan Rowland.