BP's deepwater oil hunt off Australia evokes Gulf disaster fears

28 Apr9:07 AM

[Five years after the Gulf of Mexico oil spill poured millions of barrels of crude into the sea, BP Plc is being challenged over its hunt for oil in the pristine waters off southern Australia.

Just over a year before the UK-based company has said it expects to start drilling, environmentalists say the company hasn't yet disclosed its full emergency-response plans for a potential spill in the Great Australian Bight, home to about 18 threatened species from whales to turtles.

BP's initial models showing a less than 10 per cent chance that a worst-case incident would lead to oil threatening areas where whales are likely to feed. It's clear the project will face significant scrutiny before drilling begins.

"The Gulf of Mexico scenario was an absolute disaster, but the stakes are much higher out here," said Peter Owen, the Wilderness Society's South Australia director. "This is an undeveloped, non-industrialised part of the world, and the risks are high. It's very deep, very rough and very remote."

BP said that it has "the technological capability and expertise to safely explore the Great Australian Bight," according to an e-mailed statement. The company had initially planned to begin drilling in early 2016 and pushed that out because of potential delays with the rig.

More than 85 per cent of species in the Bight aren't found anywhere else, according to Australia's national science agency, the Commonwealth Scientific & Industrial Research Organisation. Species in the Bight include the southern right, sperm and blue whales as well as sea lions and sharks.

BP estimated last year it would spend more than A$1 billion (US$785 million) to drill 400 km west of Port Lincoln, in a region it describes as "pretty much the last big unexplored basin in the whole world." About 250 km to the north, endangered southern right whales gather to give birth, drawing visitors to cliff-top lookouts on the nearby coast.

BP is working with Statoil ASA and plans to drill in waters as deep as 2,500 metres. The Bight is a "hostile" place to work, according to BP's website. Waves that reach 10 meters in height are comparable to conditions in the North Sea, and will happen more often.

They aren't the only companies planning to drill in the Bight. Chevron Corp won acreage in the region in 2013 and proposed spending almost A$500 million. Murphy Oil Corp and Santos Ltd also have permits to explore.

The prize could be huge.

The Bight has the potential for a string of discoveries of about 100 million barrels of oil, said Barry Goldstein, executive director of energy resources for South Australia's state government.

"It's got to be elephant-hunting country," he said, using the term often used for discoveries with at least half a billion barrels of oil.

BP's offshore efforts in Australia call up memories of the April 2010 blowout of the Macondo well off the coast of Louisiana. The worst spill in US history killed 11 people aboard the Deepwater Horizon drilling rig.

The company expects to submit its environmental-protection plans to Australian regulators and release them publicly later this year. New deepwater drilling operations must have access to capping equipment and have plans for relief wells. They must also demonstrate that oil-spill contingency plans take account of the risks, BP said.

"BP's own requirements for oil spill preparedness, response planning and crisis management incorporate what we have learned over many years of operation, and specifically from the Deepwater Horizon accident," the company said.

In a worst case scenario, without any response, a spill would result in as much as 805 metric tons of oil hitting about 100 km of shoreline, according to a BP presentation. It predicted a less than 10 per cent chance of oil reaching waters where whales feed and a less than 7 per cent probability it would hit the coast.

Drilling next year may be well timed. Global exploration costs are forecast to drop by a third in 2016 as oil-services companies reduce fees to win contracts, according to the consulting firm Wood Mackenzie Ltd. BP declined to comment on expected costs in Australia.

BP is curbing investment in other regions after oil prices slumped. Chief Executive Officer Bob Dudley said in February it could be a long time before oil returns to US$100 a barrel.

In the Bight, the company is fulfilling a commitment to drill when it won the permits, said Graeme Bethune, CEO of the consulting firm EnergyQuest in Adelaide, Australia.

"Companies have to plan a long way ahead," he said. "If you are first into a completely new basin, and you are successful, that's terrific." The country is strengthening drilling regulations. It formed the National Offshore Petroleum Safety and Environmental Management Authority in 2012, after the Gulf of Mexico disaster and the 2009 Montara spill in the Timor Sea that's considered one of Australia's worst oil spills.

"No question, environmental protection comes first," said South Australia's Goldstein. "The drilling programs are eminently manageable, but you've got to watch it like a hawk."

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