Matt Chambers, 26 April 2016

Oil giants BP, Chevron and Statoil are chasing more than $100 billion of potential oil resources in the Great Australian Bight and have told a Senate inquiry that if they are allowed to drill the benefits could match those delivered by the Bass Strait oil and gas fields over the past 40 years.

Illustrating why oil’s big guns are pushing ahead with high-risk exploration in the Great Australian Bight basin, consultants Wood Mackenzie have estimated the region contains a potential resource of 1.9 billion barrels of oil equivalent, worth $US84bn ($130bn) at the current depressed prices.

Standing in the industry’s way are rough seas that halted the last deepwater exploration well ­attempted in the Bight 13 years ago, a 90 per cent failure rate for frontier exploration wells and green opposition to drilling in the environmentally sensitive area.

“The Great Australian Bight is one of the last remaining offshore frontier exploration basins in Australia and, indeed, the Asia-­Pacific,” Wood Mackenzie’s head of Southeast Asian oil and gas research, Andrew Harwood, told The Australian.

Because of a lack of discoveries and drilling in the basin, the estimate is drawn from the limited previous drilling and surveys.

Mr Harwood said frontier drilling, with its high costs and high risks, was not front of mind for many oil companies right now, presenting another challenge to Bight exploration.

“Given the decline in oil price we’ve seen in the last two years, and its impact on corporate budgets, we’ve seen a shift in focus away from frontier drilling towards lower-cost opportunities with shorter lead times to production,” he said.

Despite this, BP says it will push ahead with its plans and BHP Billiton is ramping up its frontier offshore drill spend in the Americas and off Western Australia, after electing not to pursue Bight opportunities. Santos is also looking to drill in the Bight.

Wood Mackenzie’s resource estimate has been made public in BP’s submission to the Senate inquiry into drilling in the Bight, which will probe potential risks, benefits and the quality of oversight of the program.

BP’s committed spend of $605 million, including drilling slated for October, and an intended spend of another $832m, make it the driving force behind the latest push in the Bight.

If it can get final government approval, it plans to use the Ocean Greatwhite, a $US755m ($980m) exploration rig being custom built in South Korea’s shipyards to handle the Bight’s rough seas and deep water. BP plans to drill about 300km southeast of Ceduna, which is about the furthest offshore that helicopters can service a rig, in water 2km deep.

BP’s presence means its Deepwater Horizon disaster six years ago in the Gulf of Mexico, where 11 people died and widespread ­environmental damage was caused, is front and centre of concerns over the safety of drilling in the region.

The British oil major says industry practices have improved substantially since the disaster, and the Montara spill off WA, also in 2009, had improved Australian oversight. BP says the potential economic benefits for the nation are big.

“Bass Strait oil and gas operations have not only provided energy to Victoria and the east coast of Australia, they have also sustained tens of thousands of jobs as well as billions of dollars in tax revenue,” BP said in its submission.

It said the Woodside Petroleum-run North West Shelf LNG venture in WA (in which BP has a stake) had by 2009 increased GDP by $70bn and paid taxes of $5bn.

“It is too early to say whether South Australia can emulate this success — but it is certainly a prize worth hoping for,” BP said.

Chevron has committed to spending $486m in the Bight and also talked up the economic potential.

“If exploration in the Bight is successful, Chevron can significantly add to Australia’s resource base and potentially open the door to new areas of development and ultimately create more jobs and opportunities for the South Australian and national economies,” the US oil giant said.

Chevron, which is struggling with delays and cost blowouts at its $US54bn Gorgon LNG project in WA, did not mention it had recently asked for its work program commitments to be suspended because of delays identifying drilling targets.

That was left to the South Australian government to reveal in its submission.

Environmental groups, including the South Australian Conservation Council, Greenpeace, the International Fund for Animal Welfare and the Wilderness Society have all made submissions objecting to drilling on the basis of the risk to marine life and coastal regions and global warming concerns.

“At a time when the world is working to address the damage that fossil fuels are causing the global climate, and when the memory of the disastrous Deepwater Horizon oil spill is still fresh, it seems an incongruous time to be considering expanding oil and gas production into environmentally sensitive areas,” the left-leaning Australia Institute said in its submission.

“Decades of subsidy may be necessary before major oil and gas projects provide benefits to state governments,” it said, noting that South Australian coastal tourism, fishing and aquaculture industries already employed more than 9000 people and provided benefits through locally owned businesses.

The most recent exploration well drilled in the Bight was Woodside’s Gnarlyknots in 2003. It failed to hit oil or gas in the two of five regions it wanted to test, before bad weather led to the well being abandoned after drilling down 4.7km of a planned 5.6km.

Extracted in full from The Australian.