A new direction for AGL Energy

AGL Energy Managing Director and Chief Executive Officer Andy Vesey.

AGL Energy Managing Director and Chief Executive Officer Andy Vesey.

Gas asset write-downs, divestments and a new focus: AGL Energy’s 2015 upstream gas review was a bumpy, but necessary, ride for the company, CEO Andrew Vesey tells Gas Today.

The comprehensive review of AGL Energy’s upstream gas assets, first announced in February 2015, was required for the business to deliver on its goals in a time of volatile oil prices Mr Vesey says. The end
result? A “new phase in the development of its gas projects”.

AGL is set to focus on core gas projects including the Camden Gas Project, the Gloucester Gas Project, the Silver Springs underground storage facility, the Wallumbilla liquefied petroleum gas plant, and the Newcastle Gas Storage Facility,with the company’s strong supply position allowing the company to increase its efforts in the gas storage sector.

The biggest change for the company will be the ruling out of the proposed Camden Northern Expansion Project, which has been on hold since February 2013. The project involved 12 well surface locations containing up to six wellheads each.

Additional assets to be divested including permits PEL 4 and PEL 267, part of the Hunter Gas Project, PEL 2 in the North Camden area and the Moranbah Gas Project assets. PELs 2, 4 and 267 will be sold as part of the NSW Government’s PEL buy-back scheme.

“The buyback of PEL 2 now means there is no CSG title covering the special areas of the Sydney Water Catchment,” NSW Minister for Industry, Resources and Energy Anthony Roberts says.

With this renewed purpose, Mr Vesey says the company now has the structure in place to ensure it remains a relevant gas producer and supplier, amid a climate of volatile oil prices and increasing gas export opportunities.

“The gas business has the potential to provide vital gas resources for our New South Wales customers and is set to contribute significantly to our balance sheet and deliver solid returns for our shareholders,” Mr Vesey says. “It is important that we get the structure right.”

Mr Vesey says this focus will happen against a backdrop of uncertainty surrounding long-term oil and gas prices. “We believe that we will be able to contract sufficient gas at competitive prices, to augment our own production to satisfy our customers’ requirements”.

GLOUCESTER GAS PROJECT TO PRESS AHEAD
A key development from the review is the company’s renewed commitment to the Gloucester Gas Project in northern NSW.

In line with this, an agreement for the removal of flowback water from the Gloucester Gas Project’s four Waukivory pilot wells to an approved treatment in facility has seen tests recommence, with a final investment decision expected in 2016.

“We’ve always said these pilot wells are very important in order to obtain production flow data, as part of making our final investment decision,” Chief Financial Officer Brett Redman told Gas Today.

“We need at least six months’ of data out of those pilot wells, so that means I now expect that to occur somewhere in 2016.”

Meanwhile, with the divestment of non-core assets set to take place in 2015-16, the additional cash flow these sales will generate are likely to play a key role in the decision making process.

Add to this AGL’s history in NSW, from turning on Sydney’s first gas street lamp in 1841 to its development plans in the north of the state, and the company’s new direction should help bring about the continuation of a long and storied involvement in the state.

With this renewed purpose, Mr Vesey says the company now has the structure in place to ensure it remains a relevant gas producer and supplier, amid a climate of volatile oil prices and increasing gas export opportunities.

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