- 1 Reserves and CO2 Emissions
- 2 Strategic Significance
- 3 Companies Involved
- 4 Potential ESG Risks
- 5 NGO's Involved
- 6 Local Opposition
- 7 Status of Project
- 8 Infrastructure
- 9 Domestic Political Situation
- 10 Project Economics
- 11 Subsidies
- 12 International Dynamics
- 13 Financing
- 14 Articles and resources
Reserves and CO2 Emissions
The Australian Bight is reported to have a potential 1.9 billion barrels of oil equivalent. A high case scenario has reported that the area could produce 6 billion barrels of oil over the next 40 years.
At a time of declining domestic oil production, the Bight is prospectively Australia's largest untapped oil reserve. The Bight also contains one of Australia's and the world's great marine wildlife preserves.
Equinor is the only company considering drilling in the Bight, after BP withrew from the project in 2016 and Chevron withdrew in 2017. Australia’s offshore oil and gas authority, NOPSEMA, sent back BP’s application to drill in the Bight back twice and said BP needs a comprehensive risk assessment and oil pollution emergency plan. BP subsequently submitted a new application to drill at just two sites in its leases, but then abandoned their drilling program in October 2016.
Potential ESG Risks
Parts of Equinor's EPPs overlay the Great Australian Bight Marine Reserve (GABMR) with unique and diverse flora and fauna. It is estimated that 70% of the Australian population could be affected by an oil spill in this area, due to the number of people living within 50 km of the Great Southern Reef.
According to a March 2018 New York Times article, "Many locals harbor deep suspicions about the drilling. They describe a lack of transparency about deals between politicians and big business that has led to a mood of distrust, and a sense of defeat. “You know you’ll be told this is safe as can be,” said Brendan Guidera, an owner of Pristine Oysters in Coffin Bay, a sleepy coastal town near Port Lincoln. “When there’s so much money behind something like this, you don’t necessarily trust everything you’re told,” he said.
Large mining companies like Rio Tinto and BHP have long wielded enormous power in Australia. Separately and through industry associations like the Minerals Council, they frequently host luxury events with senior politicians. Their businesses bring in more money than just about any others in Australia, and they tend to wildly outspend any group that challenges them politically.
- The Wilderness Society
- Sea Shepherd
- The Great Australian Bight Alliance
By the time BP had announced its withdrawal, community opposition to drilling grounded in fears about the impact of oil spill had become increasingly forceful, particularly in the coastal communities of South Australia where tourism, recreation, fishing and agribusiness activities rely on the health of the Bight and “clean, green” brand positioning. Concern about and opposition to exploration in the Bight continues to grow, as do concerns regarding Australia’s national regulatory framework for offshore oil and gas with calls for the imposition of increased transparency and consultation requirements on operators. Seafood production in the Bight contributes $1.2 billion to the Australian economy while tourism contributes another $1.2 billion.
The Australian Green Party has launched a campaign to make the Bight a UNESCO World Heritage sight by 2020.
Status of Project
Equinor (formerly Statoil) is currently planning to drill four exploration wells by October 2022, one of which is to scheduled to be completed by October 2019.
BP did not release estimates of recoverable oil in the Bight, however Bight Petroleum limited estimates 9 billion barrels can be extracted from the two fields in which it holds permits (out of nine total fields). Projections based on this partial estimate mean that drilling in the Bight could produce 3 GT of CO2e, or the equivalent of nearly eight times Australia’s 2013 carbon dioxide (C02) emissions from fossil fuels, and blow the country’s remaining C02 emissions budget to 2050.
In August 2018 the Australian Petroleum Production and Exploration Association released modeling showing that the Bight could produce 6 billion barrels of oil by 2060, and increase domestic production by 62 million bpd between 2032 and 2054.
The challenging operating conditions of the Bight have forced a previous exploration effort to be abandoned and combined with the remoteness of the drilling areas raise questions about the ability to respond to a major oil spill.
Domestic Political Situation
Domestic energy prices have risen sharply while domestic oil production has dropped sharply, and Federal Resources Minister Matt Canavan cited this drop as a reason for reissuing drilling permits abandoned by BP to Statoil. Canavan framed drilling in the Bight as an issue of economics and national security.
In August 2018, facing a leadership challenge from members of his own party, Prime Minister Malcolm Turnbull announced that he would abandoned the country's pledge to reduce emissions under the Paris Agreement, and that using energy policy to reduce emissions is "madness." Facing a vote of no-confidence, Turnbull stepped down and was replaced by Scott Morrison, who pledged to focus on reducing energy prices rather than emissions.
Oil and gas taxes are under review by the Australian Parliament after revelations that the current boom in gas production would not lead to substantially more tax revenue. According to the Sydney Morning Herald, the Petroleum Rent Resources Tax (PRRT) is based on voluntary compliance and self-reporting by gas extractors, and operates with limited transparency and inadequate oversight. Australians need greater public confidence that they will benefit fairly from the exploitation of our natural resources. A 2010 review of the PRRT warned that it "fails to collect an appropriate and constant share of resource rents from successful projects due to uplift rates that overcompensate successful investors for the deferral of PRRT deductions".
With an aging fleet of coal-fired power plants, half of which will be more than 40 years old by 2030, and increasingly cost-competitive renewables, Australia is on the cusp of renewable energy boom, provided it does not commit to a new generation of dirty and inefficient fossil projects.
Three of the four exploration permit areas held by BP in the Bight Basin were “Designated Frontier Areas” when they were released in 2009. Under s36B and 36C of the Petroleum Resource Rent Tax Assessment Act 1987 (PRRT Act), exploration expenditures incurred in these designated frontier areas were eligible to be deducted from the explorer’s PRRT Act taxation liabilities at a rate of 150%. According to Fight For The Bight, this means that every $1 BP spends on eligible exploration activities in these areas, $1.50 can be deducted for PRRT purposes.
While Equinor claims to be the most carbon-efficient producer of fossil fuels in the world and has invested $200 million in renewable energy, the potential additional GHG emissions from the Bight give activists an opportunity to confront the company and its financiers about its commitment to a low-carbon future.
Articles and resources
- "Bight oil drilling could be a 'game changer'," SBS News, 6 August 2018
- Investor Briefing, Greenpeace, May 2018
- Great Australian Bight oil drilling fact sheet, Fight For The Bight, January 2018
- Drilling the Great Australian Bight: Hoping for Jobs, but Fearing a Spill, New York Times, Mar. 24, 2018
- Australia Wilts From Climate Change. Why Can’t Its Politicians Act?, New York Times, Aug. 21, 2018
- Fighting against offshore drilling, seismic testing off Kangaroo Island, The Islander, Apr. 22, 2018
- Implications of oil extraction from the Great Australian Bight for Paris Agreement long-term goal, Climate Analytics, April 2016
- Bight oil drilling could be ‘game changer’, AAP Newswire, Aug. 6, 2018
- 'Alarmingly low' oil supplies may prompt more drilling in Great Australian Bight, minister warns, ABC, May 15, 2018
- Australia pulls out of climate change targets agreed at Paris conference, The Independent, Aug. 22, 2018
- Scott Morrison, Australia’s Next Prime Minister, Pledges to ‘Heal Our Party’, New York Times, Aug. 23, 2018
- Turnbull government called on to explain where Australia's offshore gas wealth is going Sydney Morning Herald, Oct. 9, 2016
- Australia Is On The Cusp Of A Renewable Energy Boom, Gizmodo, Feb. 19, 2018
- SOCIAL AND ECONOMIC RISKS IN THE GREAT AUSTRALIAN BIGHT, Fight For The Bight, accessed August 2018
- Equinor Finds Opportunity In Transition To Low Carbon Future, Forbes, Jun. 11, 2018