The petrochemical concern told the market on Friday morning that Arrow, which is owned by Shell, Petrochina, and AGL Energy, will be forced to reduce the gas supply into its Moranbah ammonium nitrate plant.

Arrow has advised that, while the joint venture is confident that its various production enhancement initiatives and ongoing production build up from new wells will yield positive results, based on what they can reasonably predict at this time, the supply reduction will extend into 2016 and be in the order of 10-20%.

“While noting the uncertainty as to the extent of the supply reduction and its impacts, if there were to be a sustained and consistent 20% reduction in gas supply over a 12 month period, IPL estimates that the impact on the group’s net profit after tax would be in the order of $22 million,” Incitec Pivot told the Australian Securities Exchange this morning.

The impact on IPL’s NPAT for the 2015 financial year is potentially up to $6 million.

Earlier this week AGL announced it will continue with a sales process of Moranbah, as part of a dramatic restructure of its upstream gas business.

AGL has been trying to sell the CSG field, back-in rights in the wider Bowen Basin permit (ATP 1103P) and the North Queensland Energy business that includes gas supply agreements with Yabulu power station has been on the market for 18 months without a buyer, in part because the NQE business isn’t sufficient revenue to cover the fixed costs.

The various parts of the business may need to be broken up and sold individually.

AGL will take a $237 million impairment on the Moranbah business based on onerous contract provisions of $262 million, the remaining book value of NQE of $34 million and depreciation previously not recognised on the entire Moranbah project for the 18 months to 30 June 2015 of $25 million, all offset by a tax benefit of $84 million.

ATP 1103 potentially has significant value but is recorded in AGL’s books with no value.

AGL says it could easily surprise to the positive or negative, given ATP 1103 is a valuable asset, but one with a future that is in the hands of Shell, and the outcome of its merger with BG Group.

The company says it is in no rush to sell the permit without clarity around its development options.

A number of Queensland’s oldest CSG fields, including Meridian, have underperformed in recent years due to a lack of investment.