A DECISION by BP to pull out of its Great Australian Bight (GAB) programme is a major blow to Australia’s exploration sector.

With local exploration activity already hit by a global reduction in oil and gas capital spending, the news that one of the biggest campaigns of the year may be over before it started is a major blow.

BP had identified the GAB as an exciting “frontier” exploration opportunity and initial industry speculation was that the area had the potential to hold billion barrel oil opportunities.

The potential was certainly high enough on BP’s agenda to commit to the construction of a specialist rig, the recently launched Ocean Great White, and infrastructure in South Australia to support a multi-well programme.

However, as this issue of Oil & Gas Australia was going to press the company announced that it was pulling out of the GAB and focusing its interests elsewhere.

BP has denied speculation the decision was made because of the constant jurisdictional delays and the pressure of environmentalists.

Graehas taken the decision not to progress its exploration drilling programme in the Great Australian Bight (GAB), offshore South Australia.

Claire Fitzpatrick, BP’s managing director for Exploration and Production, Australia, said the decision was based on value creation.

She said BP had determined that the GAB project 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. After extensive and careful consideration, this has proven not to be the case for our project to explore in the Bight,” Ms Fitzpatrick said.

“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.”

Fitzpatrick said BP has informed federal and state governments of its decision.

“This decision has been incredibly difficult and we acknowledge it will be felt across the South Australia region. 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 honouring these.”

BP has also consulted with its joint venture partner, Statoil, who fully understands BP’s change in strategic direction and accepts BP’s decision.

“BP is a long-term, significant investor in Australia, most visibly through our retail network and refinery and also as a participant in the North West Shelf and Browse ventures,” added Fitzpatrick. ”We expect to continue to consider further opportunities to invest and grow our business here.”

BP was awarded exploration licences for four blocks in the Ceduna area of the GAB in January 2011. Seismic data was acquired in the area in late 2011-early 2012. Statoil acquired a 30% interest in the licences in 2013, BP remained operator with 70% interest.

NOPSEMA deflects responsibility

NOPSEMA, which had made a number of requests for BP to re-submit its drilling plans for the GAB, denied any blame for the decision.

“The decision by BP not to proceed with plans to drill exploration wells is a commercial decision for the company, and questions regarding the decision should be addressed to BP.

“NOPSEMA has made no further notification to BP following a request for information issued on 28 September, in relation to their environment plan for the drilling of the Whinham-1 and Stromlo-1 wells.

“The environment plans submitted by BP for drilling in the Great Australian Bight remain under assessment by NOPSEMA.

This assessment process will proceed until the environment plans are withdrawn by BP.

NOPSEMA has not received a withdrawal request.

“To date NOPSEMA has had productive dialogue with BP and other stakeholders, including community interests such as fisheries and environmental groups.

NOPSEMA will continue to engage with industry, other interested stakeholders, and the wider community,” NOPSEMA stated.

APPEA in its response to BP’s announcement highlighted the economic impact it would have on South Australia and the fact that Australia is constantly competing for international funding.

Funding competition

“The international environment for the oil and gas industry is challenging and companies are regularly reviewing their investment plans,” said APPEA director South Australia Matthew Doman.

“BP’s decision is a stark reminder that global investment in Australian resource projects cannot be taken for granted.

“But the resource potential of the Great Australian Bight remains significant and the economic and energy benefits of developing those resources will be substantial.

“Success in the Bight would ease Australia’s reliance on imported oil and deliver South Australia much-needed new investment and jobs.”

Separate programmes planned

Mr Doman said Chevron, Murphy Oil, Santos and other companies proposing exploration in the Bight would continue to pursue their plans.

He said any industry activity in the Bight would only proceed under the highest environmental standards, and only after appropriate community consultation and intense scrutiny by the National Offshore Safety and Environmental Management Authority (NOPSEMA).

“With proper regulatory oversight, there is no reason a safe, sustainable offshore petroleum industry should not be possible for South Australia, as it has been in Victoria and WA for several decades,” Mr Doman said.

“The oil and gas industry recognises that activist scare campaigns have fueled concern about exploration activity in the Bight.

“It is important that public discussion about the industry remains anchored in information that is factual, complete and relevant to the environment where the activity will take place.

“We will continue to work with local stakeholders and the wider community to address their questions and concerns.”