Bumping Beetaloo: Origin’s move to ditch gas exploration makes sense

Origin Energy’s decision to sell its interest in the contentious Beetaloo Basin project and exit other gas permits is not only a nod to the transition to cleaner renewable energy, but also a recognition of the commercial risks associated with long-term capital investments in developing new supplies of gas.

This announcement feels more symbolic given it represents no meaningful or bold move towards transition away from fossil fuels in the short to medium term. It’s incremental progress on the green spectrum even though Origin boss Frank Calabria said the money diverted from the gas projects will be go towards growing ‘cleaner energy’.

It is also a savvy and pragmatic commercial decision by Origin’s board, which is attempting to ratchet up its decarbonisation bona fides, while it sacrifices very little, and reduces risk by redirecting capital. Origin investors should be pleased by the move.

Origin holds a 27.5 per cent interest in and is the operator of the $27.4 billion Australia Pacific LNG – an investment that gave the company a record cash distribution of $1.6 billion in 2022, thanks to the booming oil and spot LNG prices. This project has a lifespan of at least 30 years and Origin is a committed investor.

“We believe gas will continue to play an important role in the energy mix and it remains a core part of our business,” Calabria said on Monday.

But the decision by Origin to exit Beetaloo and other exploration permits says everything about the risk of getting a return on investment in new oil and gas projects that are years away from production.

While the prices of oil and gas have been pumped up by the Russian invasion of Ukraine, the outlook post resolution of this war remains particularly uncertain. That makes the merit of capital-hungry projects, still in their formative stages, questionable in a world looking to reduce its reliance on fossil fuels.

Beetaloo was the largest and most advanced of these gas projects that Origin is now looking to exit – they also include one in West Australia’s Canning Basin and another in Queensland’s Cooper/Eromanga Basin.