(Bloomberg) -- AGL Energy Ltd., Australia’s biggest electricity producer, will exit natural gas exploration and production after the plunge in energy prices and expects to book A$640 million ($459 million) in writedowns.
AGL is abandoning the Gloucester gas project in New South Wales and will stop production at Camden in 2023, 12 years earlier than planned, the Sydney-based company said Thursday. AGL also plans to sell gas assets in Queensland.
“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. The decision won’t result in any change for AGL’s commercial or retail customers, as the company said it has sufficient sources of gas supply.
The decision by Chief Executive Officer Andy Vesey follows an almost 70 percent decline in oil prices over the past two years that has forced explorers and producers globally to cut spending. AGL is also considering speeding the closure of its coal-fired power plants as it expands in renewable energy and emerging technologies such as battery storage.
AGL climbed 0.8 percent to A$18.66 as of 10:10 a.m. in Sydney, compared with a 0.8 percent gain for Australia’s benchmark index.
AGL, founded as the Australian Gas Light Company in 1837, doesn’t see returns to justify the investment of about A$1 billion in Gloucester, according to the company, which also cited disappointing gas flow data. Without that development, “there are limited opportunities for scale and efficiencies across projects,” AGL said.
It will book an A$119 million post-tax charge on Gloucester, A$338 million on Moranbah, A$146 million on Silver Springs, A$23 million on Camden and A$14 million on Spring Gully.
Selling the Queensland assets may take some time because of “difficult market conditions,” AGL said.
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