Origin Energy will sell its stake in its Beetaloo Basin gas project at a loss and review all its other exploration permits in a move that will distance it from an environmental controversy and end its association with sanctioned Russian oligarch Viktor Vekselberg.
Chief executive Frank Calabria said gas remained “a core part of our business” but getting out of gas exploration would free up money to “grow cleaner energy and customer solutions, and deliver reliable energy through the transition”.
Environment groups mostly welcomed the announcement but said the decision had not removed the threat of gas exploration and fracking to the Beetaloo Basin.
Origin has not completely severed links with the Beetaloo project – it has agreed to buy any gas the field produces from its new owner, a group backed by Texas oilman Bryan Sheffield.
A joint venture between Sheffield and Tamboran Resources, an Australian-listed company he backs, has agreed to pay Origin $60m for the Beetaloo project, plus a royalty payment of 5.5% of revenue for gas it produces.
Origin expects the sale to make a loss of between $70m and $90m, after tax.
Environment groups and Indigenous traditional landowners had attacked the project over concerns about the effect fracking the area might have on the water table.
Johnny Wilson, chair of Nurrdalinji Native Title Aboriginal Corporation, said “fracking is not what we want” and hoped Origin’s announcement was the start of more companies rejecting gas exploration in the Beetaloo.
“Whether it’s Origin, Tamboran, Santos or any other company, Traditional Owners will continue our opposition to fracking which we worry will damage our country, water, sacred sites and songlines, which are passed down for us to look after.”
The move is a backflip from as recently as April, when Origin said it would push on with drilling for gas at Beetaloo and said it had received advice from the government that it was not breaking sanctions slapped on Vekselberg over Russia’s invasion of Ukraine.
In October last year, Guardian Australia revealed Vekselberg indirectly owned a stake in the Beetaloo project, which was identified by the Morrison government as a priority area to help drive a gas-led recovery from the Covid-19 recession.
Vekselberg, who made his fortune from aluminium and owns a large collection of jewel-encrusted Fabergé eggs, owns 16% of Origin’s joint venture partner at Beetaloo, UK-listed Falcon Oil & Gas.
Origin owns 77.5% of the Beetaloo project and is its operator, with Falcon owning the remainder.
The deal with Sheffield and Tamboran “has an economic effective date of 1 July 2022”, Origin said.
However, Origin will continue to carry out work on the project until the deal is formally closed. The company said that Sheffield and Tamboran “will reimburse Origin for any costs incurred for the current Beetaloo workplan from the effective date until completion”.
Completion is subject to Northern Territory approval and on Friday Tamboran also told the ASX it needed to raise money to fund its stake in the transaction.
“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,” Calabria said.
“Ultimately, we believe Origin is better placed prioritising capital towards other opportunities that are aligned to our refreshed strategy.”
Calabria said gas would “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”.
Graeme Sawyer, a spokesperson for the Protect Country Alliance that is campaigning against gas exploration in the Beetaloo, said the company’s decision wasn’t surprising “given the unrelenting opposition to fracking from the Territory community.”
But he said they remained concerned Tamboran, which had refused to front a Senate inquiry, could continue to pose a risk to the area. He hoped other companies would follow Origin “and pack their bags.”
Harriet Kater, who leads work on climate change at the Australasian Centre 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.
“Divestment of fossil fuel assets does not reduce emissions – it just shifts them ... [Origin] cannot claim this transaction reduces its supply chain emissions or is aligned with its commitment to 1.5C.
“This is just more greenwashing. Divestment is not a solution to reducing real-world emissions.”
Kater added the expected financial loss announced by Origin was “showing its exploration strategy has not been in investors’ interests”.
“Rather than seeking further buyers, Origin should commit to wind down its permits in the Canning, Cooper and Browse basins.”
Origin’s broader exploration interests include permits to drill for oil and gas in Queensland’s channel country, which is part of one of the world’s last major free-flowing desert river systems. These also form part of Origin’s decision to “exit other upstream exploration permits over time”.
Riley Rocco, coordinator of the Western Rivers Alliance campaigning against unconventional gas in the Channel Country, hoped the announcement “will be swiftly followed by a clear commitment from Origin to abandon plans to drill for oil and gas in the rivers and floodplains of the Lake Eyre Basin in Queensland.”
Rocco said the group was still waiting for the state government to fulfil a promise to protect the river system.
Origin owns 27.5% of APLNG, which runs a gas pipeline and export terminal at Gladstone, in Queensland.
Gavan McFadzean, climate program manager at the Australian Conservation Foundation, said Origin had “seen the writing on the wall for long-term gas exploration and is getting out while it can”.
“Big new coal and gas projects are material risks, so clever companies are divesting before they find themselves landed with stranded assets. Australia’s energy future is in renewables, not dirty coal or gas or dangerous nuclear.”
