BP has abandoned a controversial multibillion-dollar plan to drill for oil and gas in the deep waters of an Australian marine park, citing low oil prices.
The UK energy company said on Tuesday that the project in the Great Australian Bight marine park — a pristine stretch of ocean off the coast of South Australia that is a sanctuary for whales and other protected species — would not be able to compete for capital investment with other opportunities in its global portfolio.
“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,” she added.
The global oil and gas industry has slashed spending on deep water exploration due to lower oil prices and the challenges of making a profit from riskier and more complex projects. Last year Royal Dutch Shell and Statoil abandoned plans to drill for oil and gas in the Arctic.
BP is still trying to recover from the “Deepwater Horizon” oil spill disaster — the 2010 blowout at a BP-operated well in the Gulf of Mexico that resulted in the deaths of 11 people and cost the company $62bn. The company told the Financial Times this week that it would pursue efficiency and profit rather than volume growth.
Tuesday’s decision by BP was welcomed by environmentalists, who opposed drilling due to fears that of a similarly damaging oil spill disaster. The Wilderness Society urged other oil and gas companies to follow BP’s lead and quit exploring in the Great Australian Bight.
“This decision shows that it’s too expensive to establish the significant and costly risk management and clean up capacity infrastructure needed to protect our communities” from the enormous associated spill risks, said Lyndon Schneiders, Wilderness Society national director.
We will only pursue frontier exploration opportunities if they are competitive and aligned to our strategic goals … This has proven not to be the case for our project to explore in the Bight
Statoil and Chevron are also among the companies with permits to explore the area, which research group Wood Mackenzie estimates could contain up to 1.9bn barrels of oil equivalent — worth at least $87bn at current oil prices.
BP rejected the claims by environmental campaigners. It said its decision to drop the drilling programme had nothing to do with a regulatory review by Australia’s oil and gas regulator, which knocked back a previous environmental plan submitted by BP and delayed its decision on the newly submitted plan twice in recent months.
However, BP’s withdrawal was condemned by the South Australian government, which will lose out on hundreds of millions of dollars of investment in onshore facilities to support the drilling programme.
Tom Koutsantonis, South Australia’s treasurer, said he was bitterly disappointed and that BP had done tremendous damage to their “international reputation” by pulling out of the project.
“They made a promise to the Australian government that they would spend nearly $1.4bn on exploration in the Great Australian Bight when they tendered for these tenements and now they withdraw,” he told reporters.
BP said it expected to consider further opportunities in Australia to invest and grow.
It said it had consulted Statoil, BP’s joint venture partner in the Great Australian Bight project, and that the Norwegian company “fully understands BP’s change in strategic direction and accepts BP’s decision”.
