AGL’s Coal-Seam Gas Project Delayed With Output Seen in 2018

AGL Energy Ltd., Australia’s second-largest electricity and gas retailer, expects a delay at its Gloucester coal-seam gas project after the detection of potentially hazardous chemicals last month forced it to halt tests.

AGL is targeting gas production to start there in 2018, outgoing Chief Executive Officer Michael Fraser said today in a phone interview. The Sydney-based company had said in August that it expected first gas in the third quarter of 2017.

AGL has faced concerns that coal-seam gas development and hydraulic fracturing, or fracking, will harm the environment as it seeks to extract supplies in Australia’s most populous state to tackle a looming shortage. Gloucester could supply more than 15 percent of New South Wales’s gas needs, AGL said.

The company said in January that it found benzene, toluene, ethylbenzene and xylene in water samples, prompting the state Environment Protection Authority to investigate. The chemicals are probably naturally occurring, and none are in the fluid used in fracking at the Waukivory pilot, AGL said.

“We believe it can be dealt with appropriately,” Fraser said. “We have categorically ruled out that it was introduced at all by the fracking fluids. We just need to see what the outcome of the investigation is.”

AGL rose 4.3 percent to A$15.08 in Sydney trading, while the benchmark index declined 0.5 percent. The company’s 18 percent increase in first-half net income to A$308 million ($239 million) today beat analyst estimates.

AGL completed the fracking of four wells in November as part of the Waukivory pilot. The pilot needs to be completed before AGL can go ahead with the Gloucester project.

AGL in November named a new CEO, Andrew Vesey, and said he would take over after Fraser steps down today. Fraser said he doesn’t plan to take another full-time executive job.

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