The struggling gas industry in NSW has suffered another blow with the owner of the only prospective coal seam gas operation signalling a possible exit from the sector.
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Santos said in a statement to the stock exchange on Thursday that it had relegated its billion-dollar Narrabri gas project in the state's north west to a "non-core asset", stoking speculation it would sell the venture.
It left out Narrabri from its five "core" projects, which include its Queensland liquefied gas projects, placing it instead in a sixth group, along with assets in Gippsland and overseas operations in Indonesia, Bangladesh, Vietnam and Malaysia.
These secondary assets would have to operate under a "sweat or exit" strategy to "maximise value", although Santos insisted it was premature to view the move as a plan to ditch the controversial Narrabri project.
The company had hoped to be supplying gas to the NSW market by 2017 but is yet to submit its environmental impact statement (EIS), implying large-scale production could be years away.
"The Narrabri gas project remains a strategically important asset for Santos, which has the potential to produce much-needed natural gas for NSW," a spokesman told Fairfax Media.
"Santos is continuing to progress the approval processes and will submit the EIS for the project in the near future."
Opponents of the project said the reorganisation showed the venture had no future, and called on the government to cancel its licence.
"It's now been almost three years since the Narrabri project was given 'Strategic Energy Project' status to fast track it through the planning system," Jeremy Buckingham, NSW Greens energy spokesman, said.
"We've seen farmers and others protest and be arrested trying to protect the land and water, and particularly the Great Artesian Basin," he said. "How long must the community remain vigilant and suffer uncertainty?"
The government said it understood Santos had not changed its view that the Narrabri project was "still an important strategic opportunity", a spokesman for NSW Energy Minister Anthony Roberts.
"How Santos organises their corporate activities is a matter for the company."
The government remains commitment to roll out its new Strategic Release Framework in 2017, where communities would be consulted upfront about potential impacts of major projects before an area is released for exploration, the spokesman said.
CSG retreat
CSG has been in retreat in NSW, with the Baird government buying back most of the explorations licences so that they cover less than 7 per cent of the state down from 60 per cent.
In February, AGL, the only operator of a CSG field – based in Camden on Sydney's south-west – announced plans to exit the upstream gas industry, including its mishap-prone exploration operations near Gloucester in the state's mid-north coast region.
The venture's 20 per cent partner, EnergyAustralia, wrote down the book value of the project to zero almost two years ago. Catherine Tanna, EnergyAustralia's managing director, said on Wednesday that the project could still get up provided it got "the right support".
Ron Campie, president of the People for the Plains, said the Narrabri project "has been just a disaster after disaster" because of environment spills and other issues.
The group, which is challenging in the appeals court the government's approval of a wastewater plant for the project at Leewood near Narrabri, is worried the first stage of 850 CSG wells in the Pilliga State Forest will eventually expand onto nearby farmland – if it ever proved profitable.
"They really don't know how much gas is in the ground," Mr Campie said.
