Chevron Loses Taste for Oil in Great Australian Bight

MELBOURNE, Australia-- Chevron Corp. has abandoned plans for deep-water exploration wells off Australia's southern coast, the second oil major to be squeezed out of the Great Australian Bight, citing low oil prices.

The U.S. company said its exploration program in the Bight had failed to compete for capital against other projects in its global portfolio. It follows BP PLC's decision a year ago to halt its own exploration efforts there, saying the project didn't stack up financially.

Nigel Hearne, managing director of Chevron Australia, said the decision to halt exploration was not due to regulatory, community or environmental concerns. "We are confident the Great Australian Bight can be developed safely and responsibly and we will work closely with the interested stakeholders to help realize its potential," he said.

The Bight is seen as one of the most prospective oil frontiers in Australia, possibly rivaling the southeastern Bass Strait, where Royal Dutch Shell PLC and BHP Billiton Ltd. have pumped more than 4 billion barrels of crude and some 8 trillion cubic feet of gas over about 40 years.

Much of the area marked for exploration in the Bight, which stretches about 1,000 miles between the states of South Australia and Western Australia, lies in a marine reserve, home to whales and sea lions. It's a rich fishing ground and lures tourists who come to view great white sharks from diving cages. Yet it is known for extreme weather, and environmental groups have warned of risks to wildlife and the coast in the event of a deep-sea well blowout.

Greenpeace said Chevron's decision was a signal for Norway's state-owned Statoil ASA--the remaining energy major in the Bight, having revived BP's drilling plans in June--to abandon the area. "The coastal communities of southern Australia have dodged another bullet, but the threat of Statoil still looms," Nathaniel Pelle, a campaigner for the environmental group, said Friday.

Like Chevron, BP had stressed its decision to leave the Bight was commercial, despite coming weeks after Australia's oil-and-gas regulator requested more information on how the British oil giant planned to manage environmental risks there.

In late 2013, Chevron bought two exploration licenses in the Bight, covering a total of more than 12,000 square miles. The company said early seismic surveys had been promising and it had planned four exploration wells. In a submission to Canberra this year, Chevron estimated each well could cost 100 million Australian dollars (US$78.2 million), though in Australia only 14% of wells drilled typically lead to production.

Chevron said it remains focused on Western Australia, where it has invested billions of dollars in natural-gas operations. Last week. the company took stakes in three offshore exploration blocks in the Northern Carnarvon Basin, while its Wheatstone project began producing liquefied natural gas this week. It also ramped up LNG output at its Gorgon project on Barrow Island in March.

The Australian Petroleum Production and Exploration Association, an industry lobby group, said Chevron's decision was a reminder that investment in developing Australia's energy resources can't be taken for granted. It estimates onshore and offshore oil-and-gas exploration in the country is at 30-year lows, due to difficult market conditions and rising regulatory costs.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

October 12, 2017 22:15 ET (02:15 GMT)