The Australian Business Review | August 26, 2017
AGL Energy’s protracted effort to offload its Queensland gas assets has finally reached fruition, with the company agreeing to a sell them to Chinese interests for an undisclosed sum.
AGL, which formally announced it was putting its gas interests up for sale in February last year, yesterday said it had sold its 50 per cent interests in the Moranbah gas project and North Queensland Energy joint ventures, as well as its rights in an exploration licence in the Bowen Basin.
The fields will be bought by Chinese duo Shandong Order Gas Co and Orient Energy.
Arrow Energy, the Queensland coal-seam gas joint venture between Royal Dutch Shell and PetroChina, owns the other 50 per cent of Moranbah and holds the right to match the offer from the would-be buyers.
But the Moranbah fields sit in the Bowen Basin, which has proven more complex to develop than the Surat Basin coal-seam gasfields which account for the bulk of Queensland’s gas production, and could limit the willingness of Arrow to exercise its rights. The Arrow partners are estimated to have spent hundreds of millions assessing the Bowen Basin but appear to have shifted their focus away from the region in recent years.
The sale to Shandong and Orient will also be conditional on securing Australian and Chinese approvals and consents from joint-venture parties.
“AGL will provide further details of the financial outcome of the sale once it achieves financial close but does not expect any further impairments as a result of the sale of these assets,” AGL said.
The Queensland gas interests were part of a basket of gas assets that suffered a $603 million writedown early last year when AGL first announced its intention to exit the upstream business.
The assets comprise the bulk of AGL’s natural gas division, which recorded an underlying loss before interest and taxation in the 2017 financial year of $31m. That was an improvement from the $45m underlying loss recorded by the arm in financial 2016.
The deal represents the first entry into the Australian gas industry for Shandong, which is described as a Chinese gas distribution company that supplies gas to seven million residents and 20,000 industrial customers in China. The company has total assets of more than $US5.5 billion ($6.95bn).
Orient Energy has been active in Queensland coal-seam gasfields in recent years, acquiring equity from Pilot Energy and buying gas assets near Roma from Santos. Former Arrow Energy general manager Xingjin Wang is listed as a director.
Gas from the Bowen Basin is currently piped into Townsville for domestic use. In June, APA signed an MOU with Blue Energy to study the development of a pipeline that would connect the Bowen Basin gas fields with the broader east coast gas market to the south, potentially opening up the basin to deeper demand.