Origin Energy will sell its stake in a gas project in the Bital Basin at a loss and revise all other exploration permits, distancing it from the environmental controversy and ending its ties to sanctioned Russian oligarch Viktor Vekselberg.
Chief executive Frank Calabria said gas remained a “core part of our business” but exiting gas exploration would free up cash to “grow cleaner energy and solutions for customers and provide reliable energy during the transition.”
Environmental groups largely welcomed the announcement, but said the decision did not remove the threat of gas exploration and fracking to the Bitalu Basin.
Origin has not completely cut ties with the Beetaloo project – it has agreed to buy all the gas produced from the field from its new owner, a group backed by Texas oilman Brian Sheffield.
A joint venture between Sheffield and Tamboran Resources, the Australian company it backs, has agreed to pay Origin $60 million for the Beetaloo project, plus a 5.5% royalty on the gas it produces.
Origin expects the sale to generate an after-tax loss of between $70 million and $90 million.
Environmental groups and indigenous traditional landowners have attacked the project because of concerns about the impact of fracking on the area’s groundwater table.
Jonny Wilson, chairman of the Nurrdalinji Native Title Aboriginal Corporation, said “fracking is not what we want” and hoped Origin’s announcement was the start of more companies abandoning Bitala gas exploration.
“Whether it’s Origin, Tamboran, Santos or any other company, Traditional Owners will continue to resist fracking, which we fear will harm our country, the water, the sacred sites and the songs entrusted to us to care for them.”
The move is a reversal from as recently as April when Origin said it would continue gas drilling in Bitala and said she had been advised by the government that she was not in violation of sanctions imposed on Vekselberg over Russia’s invasion of Ukraine.
Guardian Australia last October revealed that Vekselberg indirectly owned a stake in the Beetaloo project, which the Morrison government has identified as a priority area to promote gas recovery after the Covid-19 recession.
Vekselberg, who made his fortune in aluminum and owns a large collection of jewel-encrusted Fabergé eggs, owns 16% of Origin’s joint venture partner Beetaloo, Falcon Oil & gas.
Origin owns and operates 77.5% of the Beetaloo project, while Falcon owns the remainder.
The deal with Sheffield and Tamboran “will come into economic effect on 1 July 2022”, Origin said.
However, Origin will continue to work on the project until the deal officially closes. The company said Sheffield and Tambaran will “reimburse Origin for any costs incurred for the current Beetaloo work plan from the Effective Date through Completion.”
Subject to revision Northern region approval, and Tambaran also told the ASX on Friday that it needed to raise money to fund its stake in the deal.
“Despite the prospects of any of these permits, generally, experience in the development of these types of projects shows that the exploration and evaluation phase can be uncertain, and it can be capital intensive to bring the projects to production,” Calabria said.
“Ultimately, we believe Origin is better off prioritizing capital on other opportunities that align with our renewed strategy.”
Calabria said gas will “continue to play an important role in our business, particularly through our interest in Australia Pacific LNG and our role as an exploration operator in that venture, as well as in the wider energy landscape as we seek to maintain reliable energy supplies for customers and accelerate our investment in the energy transition.”
Graham Sawyer, spokesman for the Protect Country Alliance, which campaigns against gas exploration at Beetaloo, said the company’s decision was not surprising “given the unrelenting opposition to fracking from the Territory community”.
But he said they remain concerned that Tambaran, who has refused a Senate inquiry, may continue to pose a danger to the district.
“Origin’s decision also shows that there is no money in fracking in the Territory – companies like Origin do not make these decisions to be environmentally or socially friendly – and we hope that Tamboran, as well as other companies operating in the Territory, will soon sometimes they come to the same conclusion and pack their bags.”
Harriet Cater, who leads climate change work at the Australasian Center for Corporate Responsibility, said Origin’s agreement to buy gas from any successful Beetaloo development would do little to reduce greenhouse gas emissions – either globally or for Origin.
“Releasing fossil fuel assets does not reduce emissions – it just moves them… [Origin] cannot claim that this transaction reduces emissions in the supply chain or meets its 1.5C obligations.
“It’s just more greenwashing. Alienation is not the solution to reducing real emissions.”
Cutter added that the expected financial losses announced by Origin “demonstrate that its exploration strategy is not in the best interests of investors”.
“Instead of looking for new buyers, Origin should divest itself of its permits in the Canning, Cooper and Browse basins.”
Origin’s broader search interests include permissions to to drill for oil and gas in the Queensland Strait, which is part of one of the world’s last major desert river systems. It is also part of Origin’s decision to “relinquish other exploration permits over time”.
Origin owns 27.5% of APLNG, which operates the pipeline and export terminal at Gladstone in Queensland.
Gavan McFadyen, climate program manager at the Australian Conservation Fund, said Origin “has seen the writing on the wall about long-term gas exploration and is getting out while it can”.
“New major coal and gas projects carry significant risk, so nimble companies divest before they end up with non-performing assets. Australia’s energy future is in renewables, not dirty coal, gas or dangerous nuclear power.’