Chevron Corporation (NYSE:CVX) has announced that it is abandoning drilling plans in Great Australian Bight. The oil giant becomes the second oil major to abandon the site following BP plc (ADR)(NYSE:BP)’s exit last year. Unlike BP which had already submitted several environmental plans with all of them getting rejected Chevron was yet to turn in any to NOPSEMA – National Offshore Safety and Environmental Agency.
While the potential of the site has been compared to that of Gulf of Mexico, fossil fuel exploitation in the area has faced stiff opposition. This is because the bight consists of pristine waters besides being an important feeding and breeding ground for various marine creatures include dozens of dolphin and whale species.
Commercial decision
According to Chevron, the decision to quit the bight was purely commercial and was not influenced by regulations, government policy, environmental or community concerns. Chevron blamed the low prices of oil as well as the existence of ventures which were more competitive in Western Australia. It is expected that Chevron will sell its drilling license to another party.
“We are confident the Great Australian Bight can be developed safely and responsibly and we will work closely with the interested stakeholders to help realise its potential,” said the managing director of Chevron Australia, Nigel Hearne.
When BP disclosed that it was quitting the bight, the oil major revealed that Statoil, its junior partner, would take up the drilling licenses. Statoil is still working on plans to drill at least one exploration well within the next two years. Currently BP is still being billed over half $500,000 on a daily basis for a drilling rig which had been specifically built for the bight and which is now in standby mode.
Victory for environmentalists
According to the Australian Petroleum Production and Exploration Association, the move by Chevron to quit the bight came as a disappointment since producing oil from the area would have reduced the reliance of the country on imports. However, any oil that would have been produced would have been shipped to Asia first since Australia lacks refining capabilities.
After the announcement by Chevron, environmentalists declared victory as they urged Statoil and other firms who were planning to drill in the bight to quit as well. According to Peter Owen the Wilderness Society director for South Australia, it was uneconomical to establish a clean-up capacity necessary for the protection of communities as there are enormous spill risks associated with drilling in the bight.
On Friday shares of Chevron Corporation edged up by 0.02% to close the day at $119.16.
