UK-based multinational oil and gas company BP announced this week that it has decided not to proceed with a controversial exploration oil drilling program in the Great Australian Bight.
BP announced on Tuesday (PDF) that it had made the decision not to proceed with the program following “the review and refresh of BP’s upstream strategy earlier this year.” According to BP, the Great Australian Bight exploration drilling program “will not be able to compete for capital investment with other upstream opportunities in its global portfolio in the foreseeable future.”
“We have looked long and hard at our exploration plans for the Great Australian Bight but, in the current external environment, we will only pursue frontier exploration opportunities if they are competitive and aligned to our strategic goals,” said Claire Fitzpatrick, BP’s Managing Director for Exploration and Production, Australia. “After extensive and careful consideration, this has proven not to be the case for our project to explore in the Bight.
“This decision isn’t a result of a change in our view of the prospectivity of the region, nor of the ongoing regulatory process run by the independent regulator NOPSEMA. It is an outcome of our strategy and the relative competitiveness of this project in our portfolio.”
In January 2011 BP was awarded the exploration licenses for four blocks in the Ceduna area of the Great Australian Bight — the large bight-looking open bay at the middle-south of Australia. Rumors that the Great Australian Bight could have oil reserves matching those of the massive Gulf of Mexico area made the prospect of drilling in the region likely, but BP’s decision suggests that the current global and local climate surrounding unnecessary oil drilling has had its impact on the company.
“This decision has been incredibly difficult and we acknowledge it will be felt across the South Australia region,” Fitzpatrick continued. “We have made significant progress with preparations for drilling in the Bight with the support of communities and federal, state and local governments. We acknowledge our commitments and obligations and our priority now is to work with government and community stakeholders to identify alternative ways of honoring these.”
Senator Matt Canavan is the Minister for Resources and Northern Australia, speaking on radio Wednesday, said that he was “bitterly disappointed in the decision” made by BP.
“BP gained access to some of our resources, or at least in terms of being able to proceed with exploration plans, by making commitments, by making almost half a billion dollars of commitments to do work in these areas. They are walking away from that work. I would expect them to make good some of those commitments in other ways and I’ll be very interested in discussing with them, in coming days, what those plans might be.”
Continuing, Senator Canavan also had a shot at the environmental groups who have responded positively to BP’s decision. “I do think it’s the ugly side of green activism that yesterday the decision was made which impacts around 25 businesses in Ceduna, in and around Ceduna in South Australia,” he said.
Nevertheless, the news was greeted with much applause from environmental groups in Australia and from around the world.
“Even if drilling in the Great Australian Bight had been successful, production would most likely have been high-cost and many years into the future,” said Andrew Grant, senior oil & gas analyst at the Carbon Tracker Initiative. “Such frontier exploration projects are obvious cancellation candidates at a time when companies are focusing on capital discipline.”
“This decision makes both economic and climate sense from an investor perspective. More oil and gas companies should follow BP’s lead and avoid throwing cash at projects that are unneeded as the world transitions away from fossil fuels. Instead companies should align their portfolios and investment plans with a 2 degree target that prioritizes shareholder returns, and stick with a value over volume approach even as prices rise.”
“BP’s forced withdrawal from the Great Australian Bight is another nail in coffin for big oil,” said Charlie Kronick, of Greenpeace UK — though from all appearances his opinion that it was a ‘forced withdrawal’ is not based in any publicly available information.
“The case for opening up new fossil fuel reserves in high-risk environments is crumbling before our eyes under the weight of environmental, climate and economic concerns. The reality is that the future of energy won’t be pumped out of the deep water off Southern Australia, the Norwegian Arctic or the Canadian tar sands – literally the ends of the earth, where drilling is expensive, difficult or dangerous, and is usually all three. We’re facing some touch challenges, from preventing catastrophic climate change to cleaning up air pollution and avoiding the destruction of the last pristine wilderness areas on earth. Drilling for more oil isn’t the answer to any of those questions. The Great Australian Bight has avoided disaster for now, but the real challenge is to make sure these projects don’t waste millions of pounds and valuable time chasing more oil we can never use.”
Image Credit: Nachoman-au, via Wikipedia
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