BP Scraps Plans to Drill Off Southern Australia Coast, Says ‘Ocean Greatwhite’ Contract Not Impacted

Diamond Offshore’s harsh environment, ultra-deepwater drilling rig, Ocean Greatwhite. Photo: DNV GL

By Perry Williams

(Bloomberg) — BP Plc has abandoned oil exploration in the offshore Great Australian Bight, five years after it began searching for resources in one of the world’s last frontier regions and before it could drill a single well.

The decision to step away from the project off the country’s southern coast follows a review of the company’s upstream strategy and wasn’t influenced by regulatory delays, the London-based energy producer said in a statement Tuesday. The project won’t be able to compete “in the foreseeable future” for capital investment against other upstream opportunities, according to the statement.

“This decision signals the challenges to frontier deepwater exploration in the current price environment,” said Saul Kavonic, a Perth-based analyst at Wood Mackenzie Ltd. “You are now in an environment where companies are looking at the risk and reward position on how to spend the very limited amount of exploration dollars that they have.”

Global oil exploration has been curtailed by the worst price crash in a generation amid a sustained oversupply. The oil industry may cut investments for a third straight year in 2017, the International Energy Agency said last month, estimating that exploration spending will drop to about $65 billion this year after falling 30 percent in 2015.

Strategic Goals

“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,” Claire Fitzpatrick, BP’s managing director for exploration and production Australia, said in the statement.

Environmental groups opposed BP’s Great Australian Bight venture and feared an accident similar to the company’s 2010 Macondo blowout in the Gulf of Mexico. It had planned, along with its partner Statoil ASA, to drill in areas 300 kilometers offshore in waters up to 5,000 meters deep, where waves can reach 10 meters high, BP said on its website.

“The Australian Government must now recognize that deepwater exploration drilling cannot be undertaken safely in the rough waters of the Great Australian Bight, or without presenting unacceptable risks to its unique marine environment,” Lyndon Schneiders, national director of The Wilderness Society, said in an e-mailed statement.

Ocean Greatwhite

The National Offshore Petroleum Safety and Environmental Management Authority had asked BP to revise or clarify its exploration plans three times, most recently last month. The regulator said Tuesday it hasn’t received a withdrawal request from BP and its environmental plans remain under assessment. The company was awarded the exploration license in 2011 and had previously estimated the drilling program would cost more than $A1 billion ($757 million).

BP is now looking for alternative locations for the Ocean GreatWhite semi-submersible drilling rig. Built for deep water and harsh environments, it was contracted from Diamond Offshore Drilling Inc. in 2013. The decision to quit the Great Australian Bight project doesn’t impact the rig contract, BP said in its statement.

Allan Suter, the mayor of the small South Australian fishing port of Ceduna where BP had planned to base some of its operations, said the decision was a surprise.

“They were very committed and I don’t think anybody in Australia had any idea this was coming,” Suter said in a phone interview. “BP have very nicely spent $10 million making a rather good facility out at our airport and I’m sure we could make that available to another company that was going to drill out in the Bight.”

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