By James Thornhill
The Norwegian company won’t drill the Stromlo-1 exploration well in the Great Australian Bight because “the opportunity is not commercially competitive,” it said Tuesday.
Current lower oil prices and the outlook for plateauing demand amid a shift to electric vehicles and concerns over climate change has forced a rethink of many big-ticket energy projects. On Monday, Canada’s Teck Resources Ltd. pulled its application for a controversial $850 million oil-sands project, which was proposed at a time of $100 oil and also faced a pushback from environmentalists. Australia’s government on Tuesday renewed its commitment to tapping the Bight.
“Many will find Equinor’s decision not to proceed with this oil exploration project in the Great Australian Bight extremely disappointing, and it is particularly hard for South Australia,” Resources Minister Keith Pitt said in a statement. “The Bight Basin remains one of Australia’s frontier basins.”
Equinor earlier this month boosted its targets for reducing greenhouse gas emissions, even as its production hit record highs. Climate groups said its plan to open up a new region to fossil fuel production was at odds with its aim to become the world’s most carbon-efficient oil and gas company.
“The decision is likely to have been driven by stronger carbon reduction targets of the European oil companies,” said Graeme Bethune, chief executive officer of energy consultants EnergyQuest. “Carbon costs are starting to bite and the European companies appear to be setting higher hurdles for oil projects than gas.”
Industry estimates suggest the Bight could hold the equivalent of 1.9 billion barrels of oil, making it a hugely prospective resource. Other energy major have struggled to make it stack up, with both Chevron Corp. and BP Plc walking away from projects in the area in recent years.
“With three global oil giants abandoning their plans to drill in the Bight, the time for the government to give the South Australian community certainty and permanent protection for the Great Australian Bight has come,” The Australia Institute, a lobby group that researches environmental issues, said Tuesday.
Sarah Hanson-Young, a Greens senator for South Australia, welcomed the decision, saying it was good for tourism and the environment.
Three other companies also have interests in Bight exploration permits: Murphy Oil Corp., Santos Ltd. and Bight Petroleum Corp. Karoon Energy Ltd. relinquished its permit last year.
Equinor also holds an exploration permit offshore Western Australia and said it would continue with other ongoing activities in the country.
“We will engage with the federal and state authorities regarding our decision to discontinue the exploration program” for the Great Australian Bight, Equinor said.