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| A group of people hold champagne and signs with messages such as 'Bye Bye AGL' and 'Gasfield Free NSW' |
AGL says a review concludes natural gas assets will "no longer be a core business for the company"
The company said a review had concluded that natural gas assets would "no longer be a core business for the company" because of volatile commodity prices and long development lead times.
It said it would not proceed with the controversial Gloucester Gas Project, north of Newcastle, where it had proposed more than 300 gas wells.
AGL said a business case for the project "incorporated disappointing gas flow data from the Waukivory Pilot wells and economic modelling of the gas resource".
"Unfortunately, the economic returns to support the investment of approximately $1 billion were not adequate," it said in a statement to the Australian Stock Exchange.
"Exiting our gas assets in New South Wales has been a difficult decision for the company."
The company, which is Australia's second largest energy retailer, expects to write down its assets by $640 million, but said it would have a minimal impact on its 2016 full-year underlying profit.
AGL chief executive Andy Vesey said modelling on test wells found extractable volumes of gas were 20 per cent below what was needed.
"On February 16 we will be holding a town hall meeting in Gloucester, not only going over the details of those decisions, but will also be talking about rehabilitation," he said.
The NSW Opposition's spokesman for energy and resources, Adam Searle, said he applauded AGL for its decision.
"This is a responsible and a mature decision by a company that has taken a clear decision to reduce its emissions and increase its renewable energy generation," Mr Searle said.
"It is clear that if the coal seam gas industry is to have a future in NSW all of the recommendations of the chief scientist report must be implemented first, as Labor has long argued for."
Queensland assets for sale in 'difficult market'
In Queensland, the company is planning to sell natural gas assets at Moranbah and Spring Gully.
"Due to difficult market conditions this may take some time," it said.
The company said there would be no change to its commercial or retail gas operations.
"AGL is confident that it has sufficient gas for its residential and small business customers following the recent contract with the Gippsland Basin Joint Venture and the planned expansion of the Eastern Gas Pipeline [between Victoria and NSW]," the company's statement said.
The company also said it would cease production at its Camden Gas Project, in south-west Sydney, in 2023 - 12 years earlier than expected.
AGL is due to report its earnings on February 10.
Today's announcement follows a fall in global oil prices, which the company said would have a consequential effect on long-term gas prices.
Gloucester CSG opponents 'will be ecstatic'
Many people in the Gloucester community had been campaigning for years to stop the proposed 330-well development AGL had proposed.
Gloucester Mayor John Rosenbaum said he believed the company had made the right decision.
"Our community overwhelmingly will be ecstatic about this," he said.
"The uncertainty around this industry has always been frightening to us."
AGL had previously said its Gloucester Gas Project had the potential to supply more than 15 per cent of NSW's gas needs.
It was proposing up to 110 gas wells and associated infrastructure for the first stage of its gas field development, and a 15 megawatt gas-fired electricity plant.
AGL will now establish a $2 million independent trust to identify investment options in the Gloucester area.
Julie Lyford, from the Groundswell Gloucester lobby group that had been fighting the plan, said she was relieved the battle was over.
"Good things do come to fruition when you fight the right way, when you show the State Government that what they've been doing is wrong," she said.
"AGL have made a good decision, we respect that decision, and it wouldn't just be on the economics, but we respect that that is the reason they've given."
However, Rod Williams from the pro-CSG group Advance Gloucester said it was devastating news, and many residents had hoped the project would stimulate local business opportunities.
"It's going to take a while for the community to recover from this," he said.
"Obviously there are people rejoicing in the street as we speak, the ones who are in full opposition of the project, but at Advance Gloucester we are just about looking at anything that comes across the road and looking at opportunities that we can leverage from those projects coming in."
NSW Greens MP Jeremy Buckingham said AGL appeared to be making a significant effort to transition from a "climate baddie" to a company with a clean future.
He said CSG was clearly unpopular and the NSW Government should ban it across the state.
AGL has previously sold exploration licences back to the Government as part of a wider review of the CSG industry in NSW.
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