Origin Energy has agreed to sell its Ironbark onshore coal seam gas (CSG) development (Ironbark gas project) in Queensland to Australia Pacific LNG for A$231m ($165.38m).
Located in the Surat Basin, Ironbark holds 129 PJ of 2P reserves and 192 PJ of 3P reserves.
Last August, Origin Energy announced that it had entered Stage 1 front end engineering design (FEED) of the proposed onshore gas project. At that time, the company also revealed that it is assessing alternate strategic options for the coal seam gas asset.
The Australian oil and gas company is targeting to achieve first gas from the Ironbark gas project in FY2021/22.
Origin Energy CEO Frank Calabria said: “The sale represents the best way for Origin to maximise value from Ironbark. Australia Pacific LNG is able to realise additional value from the asset by utilising its existing nearby gas and water processing infrastructure to efficiently bring the gas to market.
“Origin will derive value from the development of the Ironbark asset through its investment in Australia Pacific LNG.”
Origin Energy will have the responsibility of developing the Ironbark gas project in its role as Australia Pacific LNG’s upstream operator.
The company said that it is likely to book a non-cash post-tax impairment of A$34m ($24.34m) in the 2019 half year financial statements based on the sale price of the asset.
The transaction would need the Australian Competition and Consumer Commission (ACCC) and foreign investment approvals.
The buyer of the asset – Australia Pacific LNG, which produces natural gas sourced from coal seams in eastern Australia, is a joint venture between Origin Energy (37.5%), ConocoPhillips (37.5%) and Sinopec (25%).
It is the holding company of the $24.7bn ($17.68bn) Australia Pacific LNG project commenced production in late 2015. The LNG project converts coal seam gas to LNG which is exported to Asia.
Origin Energy being the project’s upstream operator is responsible for developing its CSG fields in the Surat and Bowen basins and the main transmission pipeline that supplies the gas to the Australia Pacific LNG project on Curtis Island near Gladstone.