Origin Energy has abandoned its exploration for gas in the Northern Territory’s Beetaloo Basin, announcing a “100 per cent reduction” of existing interests and a commitment to divest from all other upstream exploration projects.
The company’s remaining mining licences will be sold to Tamboran Resources for $60 million, pending final approval from the Northern Territory government.
Origin also announced its intention to divest from all other remaining ‘upstream’ gas exploration projects (excluding its interests in Australia Pacific LNG), citing the high costs and risks inherent to the exploration and appraisal phase.
The decision is expected to incur a loss of between $70 and $90 million for Origin, in an estimate subject to the finalisation of its 2023 half-year statements.
Origin CEO, Frank Calabria, said gas will remain a core element of the company’s business.
“The decision to divest our interest in the Beetaloo and exit other upstream exploration permits over time, 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,” Mr Calabria said.
“We believe gas will continue to play an important role in the energy mix and it remains a core part of our business.
“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.
“Ultimately, we believe Origin is better placed prioritising capital towards other opportunities that are aligned to our refreshed strategy.
“The suite of agreements executed with Tamboran, allow Origin to realise value created by our investment and exploration activities to date, and ensures another operator present in the area and committed to developing its resources, can continue to take the venture forward.
“We have also signed a gas sales agreement that will deliver competitively priced gas supply to Origin if development ultimately occurs from the Beetaloo.
“We’ve been exploring in the Beetaloo Basin alongside our partner Falcon for eight years, and we’re grateful for the strong support we have received from the local community, including Native Title holders and contractors, as well as the Northern Territory and Federal governments.
“Gas will continue to have an important role in our business, particularly through our interest in Australia Pacific LNG and role as upstream operator in that venture, and in the broader energy mix as we look to underpin reliable energy supply to customers and accelerate our investment into the energy transition.”
Under the terms of the agreement with Tamboran, Origin will fully divest the entity holding its 77.5 per cent interest in the Beetaloo Basin joint venture.
Tamboran will assume operatorship of the Beetaloo Basin joint venture, which is 22.5 per cent owned by Falcon Oil & Gas Australia.
The agreement has an economic effective date of 1 July 2022, and as a result, Tamboran will reimburse Origin for any costs incurred for the current Beetaloo workplan from the effective date until completion.
Origin will also receive 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.
In addition, Origin has executed a gas sales agreement for up to 36.5PJ per annum over ten years, conditional on Tamboran taking a final investment decision on developing the project and associated infrastructure and obtaining regulatory approvals.
Completion of the transaction is subject to certain conditions, including Northern Territory Ministerial consent relating to the transfer of the shares in the entity which holds its 77.5 per cent interest in the Beetaloo Basin joint venture.
Origin will work closely with Tamboran to facilitate a smooth transition to the new ownership, particularly for key stakeholders in the Northern Territory. Falcon has a pre-emptive right to acquire Origin’s 77.5 per cent interest in the Beetaloo Basin joint venture.
