AGL’s shock decision, announced last week, will see the Gloucester gas project abandoned and the closure of the mature Camden CSG project 12 years early, in 2023.

AGL said poorer than expected test well results were the prime reason for its “disappointing” decision to pull out of the Gloucester project after so long, but the company has expressed confidence in the ongoing attractiveness of natural gas as an energy resource.

ERIC director Steve Wright said AGL’s ongoing confidence in natural gas as a contributor to the energy mix was important, particularly as AGL has a large and strong retail base and is committed to renewable energy.

“In fact, AGL is Australia’s biggest producer of renewable energy,” Wright said.

“This is a company that sees natural gas as part of a responsible transition to a greater use of renewable energy, when technological hurdles in transport and storage are overcome,” he said.

Wright also pointed out that yesterday’s decision was based on economic grounds.

“While activist groups have been quick to claim a victory, it’s clear that this was a commercial decision – AGL have said that flow test results from the pilot project at Gloucester were simply not good enough to justify the $1 billion of investment required to move to commercial production.”

The Gloucester project in the Hunter Valley could have supplied up to 15% of NSW’s domestic gas needs.

Citigroup concluded that the Gloucester did not make sense, but suggested that east coast gas markets will be well supplied for several years, even without Gloucester.

AGL, which is also Australia’s biggest polluter thanks to the coal-fired power plants it purchased from Macquarie Generation, is winding down or selling its operational gas fields and exploration licences, and will eventually shut all coal-fired power stations by 2050 in bid to limit global warming.

The decision by AGL to pull out of CSG in NSW means anti-CSG activists now have just one target: Santos, which is exploring in the Gunnedah Basin.

Protests have targeted work in the Pilliga forest near Narrabri in recent weeks, trying to blockade the Leewood construction site.

Despite the protests, which have been an irritant at the Leewood water treatment plant development, Santos says it is not going anywhere.

"Santos remains committed to exploring for, producing and supplying gas to East Coast gas customers,” a Santos spokesperson told Energy News.

"The Gunnedah Basin, in which the Narrabri gas project is based, continues to be an important source of gas resources.

"In NSW, more than one million homes, 34,000 small business and the jobs of more than 300,000 NSW workers rely on an affordable supply of natural gas.

"The development of local gas resources will be critical to achieving a supply/demand balance in the future, as the 5% of gas produced in NSW is withdrawn over the coming years."

Santos is the last company standing, both in Narrabri with EnergyAustralia, and in PEL 1 and PEL 12 with Gunnedah Basin pioneer Carbon Minerals.

Work in PEL 1 and PEL 12 has been restricted to well maintenance and environmental monitoring, with PEL 1 caught up in renewal for the past 15 months, although a budget for 2016-17 has been approved by the JV.

Santos’ core Narrabri areas are believed to be capable of supplying up to half of the state’s gas needs and will generate more than $1.6 billion in royalties.

Santos is finalising the environmental impact statement for the project, which will be submitted later this year.