AGL abandons LNG import plan at Western Port Bay

The energy major will take a $108m pre-tax hit after abandoning its controversial LNG import plant.

An LNG tanker.

AGL Energy has suffered another setback after abandoning its Crib Point LNG import terminal in Victoria and taking a financial hit following the state government’s rejection of the facility due to environmental concerns.

The power giant conceded last year that it underestimated the challenge of developing Australia‘s first gas import plant with opponents including Federal Health Minister Greg Hunt arguing it was the wrong location for a large industrial facility.

AGL “has confirmed it will cease any further development of the proposed LNG import jetty at Crib Point. This follows the Independent Advisory Committee findings and the Victorian Planning Minister’s determination on 30 March 2021 that the project would have unacceptable environmental effects,” AGL said in a statement to the ASX.

AGL will take a pre tax loss of up to $108m as a significant item in its 2021 financial accounts after only expensing $22m to date.

It represents a further blow after former chief executive Brett Redman’s sudden exit amid speculation a planned demerger had caused ructions with the board.

“From the outset, AGL recognised both the opportunity of the site at Crib Point and the environmental standards we needed to meet in a location of this kind. AGL presented a scientifically sound case, backed by experts, which demonstrated that the potential environmental effects were manageable. AGL acknowledges the IAC findings and Minister’s determination,” AGL said on Monday.

“AGL has a highly flexible gas portfolio and a supply strategy which will enable customer demand to be met from existing and new domestic supply sources and proposed third party regasification projects, leveraging LNG supply options developed for the Crib Point Gas Import Terminal Project.”

Protestors gather outside Victoria’s Parliament House to oppose the AGL gas import terminal at Westernport Bay. Picture: NCA NewsWire Andrew Henshaw

The Victorian government found marine discharges from the proposed project would have unacceptable effects on the Western Port environment in the Mornington Peninsula following an assessment of the plant amid large community opposition from local groups

The project was originally set to cost $250m with investors surprised at AGL’s disclosure that it had already spent $130m on the proposed import before it had reached a final investment decision.

AGL has emphasised the utility would continue its role as a gas trader and was open to becoming a customer from rival LNG projects.

It now faces pressure to ensure it has sufficient access to gas given the Crib Point decision given a potential shortfall in its own portfolio in the coming years.

Australia’s southern states will only dodge a gas shortfall if billionaire Andrew Forrest proceeds with a project to import LNG at Port Kembla, as production slumps from nearly depleted fields in Victoria’s Bass Strait according to official forecasts.

Six LNG projects are in the development phase on Australia’s east coast but the current frontrunners are Andrew Forrest’s Port Kembla facility and Viva Energy’s Geelong plant.

Mr Forrest, the founder and chairman of iron ore giant Fortescue Metals Group, is expected to sanction the Port Kembla terminal with a target of first supplies in late 2022 making Australia an LNG importer for the first time despite also being the world’s biggest LNG exporter.

Opponents of the project have pointed to competing sources of supply including Santos’ Narrabri coal seam gas project in NSW along with a raft of rival LNG import plants including the Port Kembla project.

Others have pointed to ambitious plans by the Victorian government to chase a 50 per cent renewable energy targets over the next decade, querying whether there will be a place for gas in the energy mix.

Originally published as AGL abandons LNG import plan at Western Port Bay