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Gas giant Origin Energy is abandoning plans to frack for gas in the Northern Territory’s Beetaloo Basin.
Key points:
- Origin expects to record a non-cash post-tax loss of $70 to $90 million from its divestment
- The energy company has been exploring gas fields in the Beetaloo for eight years
- It will still receive "competitively priced gas supply" if development proceeds in the Beetaloo
In an announcement on Monday morning, Origin said it will sell its exploration interests in the region to Tamboran Resources and its substantial shareholder, Bryan Sheffield, for $60 million, subject to consent from the Northern Territory government.
The company has also announced plans to divest from all of its remaining "upstream" gas exploration permits, because of what it has described as uncertain and expensive efforts to drive the projects into the production phase.
It expects to lose somewhere between $70 and $90 million as a result of the move, but has struck deals to buy gas from producers if production ramps up in the Beetaloo Basin.
The company will also receive a royalty payment of 5.5 per cent of revenue from gas if production goes ahead.
Origin chief executive Frank Calabria said the decision would allow the company to concentrate on a "refreshed strategy" to "grow cleaner energy and customer solutions, and deliver reliable energy through the transition."
"We believe gas will continue to play an important role in the energy mix and it remains a core part of our business," he said in a statement to the ASX.
"Notwithstanding the prospectivity of any of these permits, typically the experience in progressing these types of projects is that the exploration and appraisal phase can be uncertain, and it can be capital intensive to bring projects into production.
"Ultimately, we believe Origin is better placed prioritising capital towards other opportunities that are aligned to our refreshed strategy."
The company previously described the Beetaloo as "one of the most promising shale gas resources anywhere in the world" and was the largest player testing commercial viability of the basin's gas deposits.
The Beetaloo Basin was earmarked by the previous federal government as key to the so-called "gas-led recovery" and drew millions of dollars in grants to fast-track exploration.
Environmental groups have waged an ongoing battle against development of the basin based on concerns about greenhouse gas emissions and risks to water sources.
Despite divesting itself from the Beetaloo, Mr Calabria said Origin would still receive "competitively priced gas supply" if development proceeds in the region.
Traditional owners vow to continue fight
Today's announcement comes months after a Senate inquiry hearing in March that heard concerns from Indigenous traditional owners who said they felt they had not been properly consulted about the risks of fracking.
The decision was welcomed by long-time critics of gas exploration in the Beetaloo.
Nurrdalinji Native Title Aboriginal Corporation chair Johnny Wilson, who lives near to fracking wells in the Beetaloo Basin, said Origin's decision to pull out of the region was a "big relief".
But he said traditional owners would continue to push back on other companies pursuing further development of on-shore gas.
"Whether it's Origin, Tamboran, Santos or any other company, Traditional Owners will continue our opposition to fracking which we worry will damage our country, water, sacred sites and songlines which are passed down for us to look after," he said.
Greens Senator Sarah Hanson-Young wrote on Twitter that Origin's decision was a "big blow" to the fossil fuel industry.
"It’s expensive, doesn’t have traditional owner consent and will make the climate crisis worse," she said.
Reacting to the announcement, Northern Territory Chief Minister Natasha Fyles said Origin had made a "business decision" but downplayed any impact on the Beetaloo's viability.
"We certainly are as a government moving towards renewables," she said.
"But we need to have a sustainable energy supply so that we can transition as a territory and a nation across to renewables."
A spokesman for the Australian Petroleum Production and Exploration Association (APPEA) said the basin's gas reserves remain "a huge economic and energy security opportunity for the Northern Territory and Australia."
"Several APPEA members are active in the region and have invested millions of dollars in exploration and early development – as shown with today’s announcement of a $60 million investment in the Beetaloo and Origin planning to receive future production royalties," the spokesperson said in a statement.
"Research has shown developing the region could create up to 6,000 jobs and generate billions of dollars in revenue for governments within the next two decades."