Norway's Equinor to discontinue 'uncompetitive' exploration in Great Australian Bight

Singapore — Norwegian oil and gas company Equinor said Tuesday it will discontinue exploration in the Great Australian Bight off the country's southern coast after deciding the program was "not commercially competitive."

Market sources said the move will curb frontier oil and gas development in Australia, which became the world's largest LNG exporter in 2019 but grapples with domestic fuel shortages and imports transportation fuels from refining hubs like Singapore.

It also highlights challenges faced by international oil companies in conducting exploration work in environmentally-sensitive areas in the midst of intensifying climate change protests and low oil prices that make expensive drilling unfeasible.

Equinor, formerly known as Statoil, said its Stromlo-1 drilling plan in the Ceduna sub-basin offshore the state of South Australia was not commercially competitive when compared with other exploration opportunities in its global portfolio.

"This is a disappointing decision for Australia and South Australia. In our view, the decision is likely to have been driven by the stronger carbon reduction targets of the European oil companies," said Graeme Bethune, chief executive of Adelaide-based energy consulting firm EnergyQuest.

He said carbon costs were starting to bite and European companies appeared to be setting a higher bar for oil projects than natural gas-producing projects, as oil has a higher carbon intensity than gas. Bethune noted exploration in the Bight was most likely targeting oil, not gas.

"This is another example of European influence on investment globally, similar to the decisions by the European Investment Bank to no longer invest in fossil fuel projects in developing countries and the decision by the Swedish Central Bank to no longer invest in bonds issued by the Alberta, Queensland or Western Australian governments," Bethune said.

Equinor's decision to exit the Great Australian Bight was disappointing for the wider Australian community who need new local energy supply, and for South Australians who would have benefited from the economic activity, industry group Australian Petroleum Production and Exploration Association said.

Exploration success in the Bight could have eased Australia's reliance on imported oil and delivered the state much-needed new investment and jobs, APPEA's director for South Australia Matthew Doman said in a statement.

"Successful development could also boost our energy security. Australia's oil production has fallen significantly over the last 10 years, and we now import over 80% of the oil we use," Doman said. "While our energy mix is changing, all credible analysis shows Australia will use a lot of oil and gas for decades to come."

Equinor, which took over exploration licences in the Ceduna sub-basin in 2017, said last month it would make a 50% cut in net carbon intensity by 2050.

"We hold an exploration permit offshore Western Australia and will maintain other ongoing interests and activities in Australia," Equinor's country manager for Australia, Jone Stangeland, said.

Oil and gas exploration in the Great Australian Bight has been controversial and attracted protests from environmental groups like Greenpeace, which is calling for a permanent moratorium on oil drilling in the region.

"Equinor took over BP's exploration license to drill in deep waters 372 km south of the Ceduna coast, but is now the latest fossil fuel company to pull out of drilling for oil in the Great Australian Bight following BP's withdrawal in 2016, Chevron's exit in 2017 and Karoon Gas in 2019," it said in a statement.

"Santos, Murphy Oil and Bight Petroleum still have plans to drill in the Bight," it added.