BP Buries Plan to Dig in Great Australian Bight

BP PLC on Tuesday abandoned plans to drill deep water oil-exploration wells off the southern coast of Australia, saying the project's finances don't stack up against other opportunities world-wide.

The decision comes after oil and gas regulators last month threw a wrench into its plan to explore for oil in the Great Australian Bight, a remote stretch of ocean that is home to whales, sea lions and other wildlife. The regulators sought more information on how BP intended to manage environmental risks.

Environmental groups were quick to claim a victory against a plan they warned threatened a spill on the scale of a 2010 blowout that killed 11 workers and spewed more than 3 million barrels of oil into the Gulf of Mexico over the course of 87 days. They had said a deep-sea well blowout could put endangered animals at risk and claimed BP's emergency-response plans weren't sufficient.

Claire Fitzpatrick, BP's managing director for exploration and production in Australia, said the decision wasn't the result of a change in the company's view on the region's prospects, or the regulatory process.

"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," Ms. Fitzpatrick said.

Once the world's biggest independent oil producer, BP has slid down the rankings of oil giants in the wake of the Deepwater Horizon blowout.

The decision not to drill in the Bight comes at a difficult time for the oil and gas industry, which has suffered through a steep drop in oil prices over the past two years. Companies have slashed budgets and laid off thousands of workers as profits plummeted. BP expects to spend less than $17 billion on finding and producing oil this year, down from nearly $23 billion in 2014.

"The Great Australian Bight was seen as a potential big exception to the rule of majors deserting frontier deep water plays, but this decision comes close to signaling the death knell to frontier deep water exploration in the current price environment in the region," said Saul Kavonic, head analyst for Australasia at Wood Mackenzie.

Other oil companies, including Chevron Corp. and Statoil ASA, have sought to explore in the region. A spokesman for Chevron, which bought two deep water exploration permits in the Bight in October 2013, on Tuesday said the company would continue to push ahead with work in the area, in collaboration with government regulators and other stakeholders.

Lyndon Schneiders, national director of the Wilderness Society, an environmental advocacy organization, called on other energy companies with projects in the Bight to follow BP's lead and abandon exploration plans.

Stretching about 1,600 kilometers between the states of South Australia and Western Australia, the Bight is a marine reserve whose rich fishing grounds yield tuna and other prize species, as well as fearsome Great White sharks popular with thrill-seeking tourists who view them from the safety of diving cages.

"There's a lot of species of fish that will get affected if something goes wrong out there, from crayfish to tuna to what I do, fresh fish," trawler captain Jason Campbell said one recent afternoon after his blue-hulled vessel Gail Jeanette III returned to port following a gale that unleashed 45-foot swells and cyclonic winds that for a time knocked out power to the entire state of South Australia. "How can they drill safely in a place like this, in weather like what we've just been through."

Still, backers of the BP plan had hoped it would re-energize a region of Australia that is suffering through the end of a long mining boom which provided many local people with jobs.

BP had said the Bight's geology was similar to some of the world's biggest oil and gas regions, such as the Mississippi Delta.

Matthew Doman, a director at the Australian Petroleum Production and Exploration Association, an industry group, said current oil prices were challenging for the industry, but he believed exploration and development in the Bight was still viable.

Australia first gave BP permits to explore in the Bight in 2011, months after the Deepwater Horizon disaster. Regulators on several occasions postponed a final decision on the program. On Tuesday, the National Offshore Petroleum Safety and Environmental Authority said it was a commercial decision by BP not to explore in the Bight.

Write to Robb M. Stewart at [e-mail] and Rob Taylor at [e-mail]

(END) Dow Jones Newswires

October 11, 2016 05:35 ET (09:35 GMT)

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