Origin to sell controversial Beetaloo Basin fracking project for $60m

Origin Energy will sell its rights to drill for gas in the Northern Territory’s Beetaloo Basin to a company associated with energy billionaire Bryan Sheffield in a $60 million deal that includes royalties for the life of the gas field.

Origin’s plans to conduct hydraulic fracturing or “fracking” – extracting the gas by forcing injected water, sand and chemicals into rock fissures underground – had come under scrutiny from shareholders concerned about global warming.

Investors have quizzed Origin’s management about how fracking one of the country’s largest gas reservoirs aligns with the Paris accord to limit global warming to well below 2 degrees.Credit:Justin McManus

The company said it will focus on its “strategy and ambition to lead the energy transition.”

Origin said Monday it has signed agreements with Tamboran (B1), an entity 50/50 owned by Tamboran Resources and its major shareholder Bryan Sheffield, to take over Beetaloo.

The company has also executed a gas sale agreement for offtake of future gas production and will exit its upstream exploration permits.

“Origin will undertake a strategic review of all remaining exploration permits (excluding its interests in Australia Pacific LNG) with a view to exiting those permits over time,” Origin’s chief executive Frank Calabria said.

“The decision to divest … will enable greater flexibility to allocate capital towards our strategic priorities to grow cleaner energy and customer solutions, and deliver reliable energy through the transition,” Calabria said.

“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.”

The gas sales agreement will deliver competitively priced gas supply to Origin if development ultimately occurs at Beetaloo, he said.

Origin will get a 5.5 per cent royalty based on wellhead revenues produced from the three Beetaloo permits which are held by the entity being acquired by Tamboran (B1).

The gas sales agreement is for up to 36.5 PJ per annum over 10 years, conditional on Tamboran taking a final investment decision on developing the project and getting regulatory approval.

Origin expects to record a non-cash post-tax loss of $70 million-$90 million in relation to the transaction.

The company has faced increasing pressure from shareholders, as well as some Indigenous groups who are worried the project will threaten sacred water systems.

Investors have quizzed Origin’s management about how fracking one of the country’s largest gas reservoirs aligns with the Paris accord to limit global warming to well below 2 degrees.

More to come

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