CANBERRA: Eastern Australia-based utility AGL Energy has decided to shut its upstream gas operations, citing the “volatility of commodity prices and long development lead times.” The decision means the company will not proceed with the Gloucester coalseam gas project in the state of New South Wales.
Gloucester was originally expected to be the subject of a A$1 billion ($707 million) development which would have seen it supplying more than 15% of New South Wales’ gas needs, or about 20-30 petajoules/year, by 2018.
AGL shelved the project after disappointing flow data from Gloucester’s Waukivory pilot wells, the company said in a statement Thursday. Economic modeling of the gas resource also showed that returns would not support the investment required at the project.
The company now plans to relinquish its petroleum exploration license for the Gloucester region and will begin a decommissioning and rehabilitation program for its well sites and other infrastructure in the area.
Without Gloucester, AGL said there were limited opportunities for scale and efficiencies across projects, so it now plans to cease production at its 10-year-old Camden coalseam gas operations near the New South Wales capital of Sydney in 2023, 12 years earlier than previously proposed. The wells at Camden will be progressively decommissioned and the sites rehabilitated, the company said.
Camden currently supplies about 5% of New South Wales’ gas needs. The state imports most of its gas from neighboring Victoria in the south and South Australia to the west. The coalseam gas industry in New South Wales has been the subject of intense opposition from environmental lobby groups and activists.
The developments at Gloucester and the Santos-operated Narrabri project in the state’s north have also been delayed while the state government finalized a new regulatory regime for coalseam gas.
