The Australia Pacific LNG (APLNG) combine has agreed to acquire the Ironbark coal seam gas (CSG) project from Origin Energy Ltd., Sydney, for $231 million (Aus.). Ironbark—not to be confused with the BP PLC-led group’s conventional gas prospect of the same name offshore Western Australia—lies near Tara in the Surat basin of southeast Queensland.
APLNG uses CSG from southeast Queensland coal seams to produce LNG at its liquefaction plant on Curtis Island, near Gladstone.
Ironbark has been a disappointment for Origin, which halved the project’s production potential last year from 249 petajoules down to 129 petajoules of gas resource.
Origin is a 37.5% interest holder and operator of the APLNG group, so it will retain responsibility for development of Ironbark. Company Chief Executive Officer Frank Calabria explained, however, that the sale represents the best way for Origin to maximize value from the project. “APLNG is able to realize additional value from the Ironbark asset by utilizing its existing nearby gas and water processing infrastructure to efficiently bring the gas to market,” Calabria said. “Origin will derive value from the development of the prospect through its investment in APLNG.”
If Origin still owned Ironbark, the company would have had to enter negotiations with its APLNG partners (ConocoPhillips with 37.5% and Chinese state-owned Sinopec with 25%) to process and transport the gas and this could have caused concern.
Origin acquired Ironbark for $660 million (Aus.) in 2009 and initially estimated the resource at 840 petajoules. It submitted proposals in 2015 for the drilling of up to 600 wells so that the project could supply about 21 petajoules/year of CSG over 40 years.
Development plans dwindled at regular intervals as more exploration and engineering work was carried out. The company finally began a Stage 1 front-end engineering and design program in August 2018, but it was obvious by then that permeability problems in the coal seams had halved the potential reserves such that the project would contribute less volumes of gas over fewer years.
Origin entered the FEED program, but at the same time began assessing alternative strategic options for development. The result has been the sale of Ironbark to APLNG, albeit at a third of the price it paid for the asset 10 years ago.