Statoil ASA (NYSE: STO) expanded its position in the Great Australian Bight, sealing a swap agreement with BP Plc (NYSE: BP) for a larger interest in two offshore exploration permits while exiting two other permits nearby.
Under the deal, Statoil transferred its 30% equity interest in exploration permits EPP37 and EPP38 to BP. In turn, BP transferred its 70% equity interest in exploration permits EPP39 and EPP40 to Statoil. The swap, which was approved by the National Offshore Petroleum Titles Administrator, bumps Statoil’s interest in the two permits to 100%. Combined, the areas span 12,000 sq km offshore Australia’s southern coast.
“We have a good understanding of the geology in our license area based on high-quality 3-D data analysis,” Pål Haremo, vice president of exploration in Australasia for Statoil, said in a June 8 news release announcing the agreement. “We believe there could be an active petroleum system within our permit area, and we are now positioned to test this potential under favorable market conditions for exploration drilling.”
Statoil, which entered the Great Australian Bight with partner BP, said it plans to drill one exploration well in EPP39 before Oct. 30, 2019.
The move comes as improving market conditions gives oil and gas companies more confidence in their pursuit to find additional hydrocarbons to meet current and future energy needs.
Considered one of the world’s last remaining underexplored basins, potential plays in Bight have not been established, according to the South Australian government’s energy resources division. However, potential plays could include “highly faulted, rotated and collapsed anticlinal structures, tilted fault blocks and unconformity traps on the flanks of the rotated anticlines.”
The energy division added that the presence of large complex and highly variable structures in water depths of more than 1,000 m could have “enormous hydrocarbon potential” along with high risks.
The basin has late Jurassic- to early Cretaceous-aged sediments.
The swap comes months after BP Developments Australia Pty Ltd. withdrew exploration drilling program plans for the Stromo-1 and Whinham 1 wells in the area from Australia’s National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA).
The industry has drawn environmental opposition over drilling activity in the region known for its marine life, including sea lions and endangered southern right whales.
NOPSEMA was in the process of reviewing BP's plans when BP announced Oct. 11 that it decided not to proceed with the exploration project. The program was scheduled to start in fourth-quarter 2016.
Activity logged on the agency’s website show it had requested more information after being unable to make a decision for a second time. BP said in October 2016 that its decision was neither the result of altered views of the region’s prospectivity nor the ongoing regulatory process of the NOPSEMA.
“In the end, it will be up to the Australian regulatory authorities to grant the necessary approvals for the activity to go ahead,” Jacques-Etienne Michel, Statoil’s country manager in Australia, said in the June 8 release. “Over the coming months, we will engage in dialogue with a wide range of stakeholders, including the South Australian community.”
Statoil said it has already mapped prospects in the area. Among these is the EPP39 Stromlo-1 well, which the company said: “offers high-impact potential in a frontier exploration setting, while EPP40 represents upside exploration potential.”
Michel said Statoil will now take the “necessary time to systematically work through all the preparations needed to drill safely.
“While we are building on the previous work done in these licenses, our operational plans will have to be redeveloped,” he said.
The Australian Petroleum Production & Exploration Association was pleased with the news, saying the economic benefits could be enormous.
“Today’s announcement is good news for South Australia and a vote of confidence in the Great Australian Bight’s potential as an oil-producing region,” APPEA Director South Australia Matthew Doman said in a statement which noted a Senate Inquiry reported in May. It showed most of its voting members support oil and gas activities in the Bight, subject to robust regulatory standards.
“Australia has had, for decades, a safe, sustainable petroleum industry offshore Victoria, Western Australia and the Northern Territory. There is absolutely no reason [that] South Australia cannot also support exploration and development in harmony with its marine environment,” Doman said.
“The economic benefits could be enormous. While it is very early days, success in the Bight would attract substantial investment to South Australia and see significant local job creation.”
Velda Addison can be reached at firstname.lastname@example.org.