Overview

Australia’s offshore petroleum sector is currently operating at near record levels of investment.  There are approximately 410 active petroleum titles in offshore Commonwealth waters at present: 220 exploration permits, 39 retention leases, 80 production licences, 63 pipeline licences and one infrastructure licence.

The upstream petroleum sector in Australia is expected to grow rapidly over the next decade as regional and local demand for energy resources increases.  Australia is underexplored but remains highly prospective as demonstrated by recent petroleum discoveries.  The outlook for further significant petroleum discoveries remains positive and there are further significant investment opportunities available.

The granting of the 4 permits to BP Exploration (Alpha) Limited brings the total number of permits granted from the 2009 Offshore Acreage Release to 17.  

The Acreage

Where is the exploration area and how big is it?
Why release this area for exploration?

The Exploration Program

What exploration activities will BP undertake?
When will drilling occur?
How will the Government ensure drilling is safe?
What about remediation?
Why the additional conditions placed on these permits?
Will you place such conditions on all exploration permits going forward?

Environmental Protection

Why has the Government granted exploration rights within the Great Australian Bight Marine Park?
Has the Government put development over environment?

BP Exploration (Alpha) Ltd

Was BP Exploration (Alpha) Ltd the only bidder for these areas?
Do sole bids automatically get granted exploration rights?
What does 'pursued on a dry hole basis' mean?
Is Australia the first jurisdiction to grant titles to BP following the Macondo Incident?

The Acreage

Where is the exploration area and how big is it?

• BP Exploration (Alpha) Ltd (BP) has been granted four petroleum exploration permits as part of the 2009 Offshore Petroleum Exploration Acreage Release.
• These permits are located in the Ceduna Sub-basin, Bight Basin, which is located approximately 180km offshore in the central Great Australian Bight off southern Australia.
• The area is approximately 415 to 655 km west of Port Lincoln, and 250 to 530 km southwest of Ceduna.
• In total, the permits cover 24,570 km2, in water depths ranging from 140m at the inner margin of the permits to 4600m at the southern most point. Specifically:
  
  • Permit EPP 37 (released as S09-1) comprises 86 full graticular blocks¹ and covers a total area of approximately 6125 km2. It lies in water depths ranging from approximately 140 m to 1550 m.
  • Permit EPP 38 (released as S09-4) comprises 85 full graticular blocks and covers a total area of approximately 6000 km2. It lies in water depths ranging from approximately 1500 m to 4500 m.
  • Permit EPP 39 (released as S09-5) comprises 90 full graticular blocks and covers a total area of approximately 6335 km2. It lies in water depths ranging from approximately 1200 m to 4600 m.
  • Permit EPP 40 (released as S09-6) comprises 87 full graticular blocks and covers a total area of approximately 6110 km2. It lies in water depths ranging from approximately 1300 m to 4500 m.
• More information on the geology of these areas can be found at www.petroleum-acreage.gov.au under the 2009 Acreage Release.

¹ A graticular block is a five minute by five minute area that generally covers 70km2 (the exact size of a block depends on position on the globe).

Why release this area for exploration?

• The majority of the area covered by these permits in the Bight Basin has been released for exploration before.
  
  • It is not uncommon to re-assess the petroleum potential of areas as exploration technology and extraction techniques evolve, which is why these areas are again being titled for exploration.
• A range of major companies have investigated the petroleum prospectivity of the Ceduna Sub-basin since the late 1960s, including Woodside, Shell, BP and BHP Petroleum.
• The last phase of petroleum exploration in the Bight commenced in 2000; three permits that covered the majority of the current areas were granted to a consortium lead by Woodside.
  
  • All three permits were surrendered in 2007 at the conclusion of the initial permit term.
  • Surrender of an exploration title is a commercial matter for the companies involved, however, it is generally based on a decision time due to financial, technical or other factors (such as a companies global exploration strategy).
    
    
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The Exploration Program

What exploration activities will BP undertake?

• The exploration work programs proposed by BP include 3D seismic surveying of an area covering 11,400km2 within the first two operational years, along with the drilling of four exploration wells in the third operational year.
  
  • It is anticipated that the seismic surveying will occur in the summer of 2011-12 and that drilling will take place in either 2013 or 2014.
  • This represents the most comprehensive geological analysis of the area ever undertaken.
• Petroleum operations in the remaining three years of the permits will be dependant on the findings of the initial exploration program. 
  

When will drilling occur?

• Drilling of four exploration wells is scheduled to occur in the third operational year of the permits. It is anticipated that this will take place in either 2013 or 2014.
  
  • The duration of a permit year may be suspended and/or extended at the discretion of the Offshore Petroleum Joint Authority; this would generally occur if there were force majeure circumstances such as unavoidable delays in mobilising a rig to the area, unforseen weather patterns or a need to alter schedules due to marine animal migration.
    
• Prior to drilling, BP has committed to integrating the lessons learned from the Macondo loss of well control into its systems and processes.    
  

How will the Government ensure drilling is safe?

• Given the sensitive environmental, agricultural and cultural elements underpinning the rural economy in the Bight region, the Commonwealth-South Australian Offshore Petroleum Joint Authority has placed additional conditions on these permits.
• Australia’s offshore petroleum regulatory regime already places the onus on the operator to demonstrate to regulators that all exploration for, and extraction of, petroleum resources are undertaken in a safe and environmentally responsible manner.
• All petroleum exploration and development activities in Australian waters are subject to the stringent environmental standards and reporting requirements set out in the legislation and associated regulations, including the Offshore Petroleum and Greenhouse Gas Storage Act 2006 and the Environment Protection and Biodiversity Conservation Act 1999.
  
  • Operators must take all actions to prevent the escape of any of fluids related to drilling activities; this includes holding an approved  Well Operations Management Plan and Oil Spill Contingency Plan;
  • Operators must hold appropriate levels of insurance prior to the commencement of operations, in case any incident occurs that requires remediation;
  • Operators must provide evidence that their work practices will be carried out in a ‘workman like manner and in accordance with good oilfield practice.’(refer: OPGGSA s.569):
• The Designated Authority (in this case the South Australian Government) may also place additional conditions on specific operations approvals (such as drilling) if it is appropriate to do so to protect the environment.
  

What about remediation?

• All petroleum titleholders offshore Australia must hold appropriate levels of insurance prior to the commencement of any seismic, drilling or other exploration operations; this insurance must be sufficient to cover the cost of any potential remediation.
• If environmental remediation is required, current legislation provides wide ranging authority for the Offshore Petroleum Joint Authority (through the Designed Authority) to direct an explorer to undertake such remediation activities (OPGGSA s.585).
  
  • This may include directions relating to the removal of property; the plugging or closing of wells, conservation and protection of the environment and making good of damage to the seabed or subsoil.
    
• In relation to these permits, BP has strongly stated commitment to implement lessons learned from the Gulf of Mexico to prevent a re-occurrence of such an event.
  

Why the additional conditions placed on these permits? Doesnt Australia have a world class regulatory regime.

• The Offshore Petroleum and Greenhouse Gas Storage Act 2006 (s.99) provides that the Joint Authority may grant a petroleum exploration permit subject to any conditions it believes appropriate, provided those conditions are specified in the permit.
• Given the sensitive environmental, agricultural and cultural elements underpinning the rural economy in the Bight region, the Joint Authority has placed additional conditions on these permits, emphasising the need for oil field best practice behaviour by the operator.
  

Will you place such conditions on all exploration permits going forward?

• Use of additional permit conditions will be considered on a case by case basis, taking into consideration such things as the proximity of proposed exploration to marine parks and local economic factors.
  
• The Designated Authority (in this case the South Australian Government) may also place additional conditions on an operations agreement if it is appropriate to do so to protect the environment.
  
  
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Environmental Protection

Why has the Government granted exploration rights within the Great Australian Bight Marine Park?

• Two of the permits granted to BP are intersected by a Benthic Protection Zone within the Great Australian Bight Marine Park.  This area is recognised as having high conservation values.
• Any operations that fall within the Great Australian Bight Marine Park zone will require approval from the Governor-General in accordance with the Great Australian Bight Marine Park (Commonwealth Waters) Management Plan 2005-2012.
• Petroleum exploration activities undertaken in this area will be subject to an even higher level of environmental scrutiny and will require assessment and approval under the Environment Protection and Biodiversity Conservation Act 1999.
• Petroleum industry activities occur successfully in a range of environmentally sensitive areas in Australia and globally.
  
  • There is a need to balance responsible develop with environmental conservation.

Has the Government put development over environment?

• The Government must balance environmental, social and economic considerations when developing our natural resources.
• The discovery of new petroleum reserves has the potential to reduce Australian energy import dependence and increase supply certainty.
• A moratorium on petroleum exploration and development activities has the potential to undermine Australia’s energy security.
• Australia has a strong offshore petroleum safety and environmental regulatory regime.
• Our approach must be to continue to ensure oil and gas exploration and production in Australian waters is the best and safest in the world.
• That means we have a world-class regulatory system, diligent and effective regulators and competent and professional operators.
• Lessons from Montara and the Gulf of Mexico are being examined to integrate them into our existing systems.
• Shutting down the industry and putting the nation's energy security, jobs and the economy at risk does nothing towards achieving any of these goals.

BP Exploration (Alpha) Ltd

Was BP Exploration (Alpha) Ltd the only bidder for these areas?

• Yes, bids were only received from BP for these areas.
  

Do sole bids automatically get granted exploration rights?

• No.  Bids for exploration permits are assessed against the publically available Offshore Petroleum Exploration Bid Assessment Guidelines (refer: www.petroleum-acreage.gov.au).
• The Joint Authority must be satisfied that the applicant has developed an exploration strategy and work program that will significantly advance the assessment and understanding of the petroleum potential of the permit area.
• The work program must, at a minimum, include new exploration work and be coherent, credible and able to be pursued on a dry hole basis.
• The strategy must be underpinned by a sound technical assessment of the permit area, along with evidence of the technical and financial competence of the applicant to facilitate the proposed work program.
• Consideration is also given to any past performance issues, either within Australian or internationally, that may adversely impact on the ability of the applicant to undertake the proposed work program.
• BP’s bids were assessed against the publically available criteria, in consultation with the South Australian Government.
  
  • The bids were considered to satisfactorily meet all criteria.

What does 'pursued on a dry hole basis' mean?

• A work program that is able to be ‘pursued on a dry hole basis’ is one that the Joint Authority is confident that the explorer will be able to facilitate in the event that the explorer drills a well that fails to encounter hydrocarbons.
• Failure to encounter hydrocarbons in a well often results in the prospectivity of a permit being downgraded.  This may impact on the explorers’ decisions in relation to future elements of a work program.
• The Joint Authority needs to be confident that the work program proposed for the remaining years of the permit term can be pursued despite the fact that early drilling results may be discouraging.
  
  • Consideration of a work program against this criterion takes into account both technical and financial aspects of the bid.

Is Australia the first jurisdiction to grant titles to BP following the Macondo Incident?

• No.  Since the 20 August 2010 incident BP has increased its international petroleum portfolio:
  
  • In the North Sea off Norway, BP increased its equity in the Valhall and Hod fields, where it is the operator.
  • In the Caspian Sea off Azerbaijan, BP increased its equity in the Azeri-Chirag-Gunashli (ACG) oilfield, which it operates.
  • In the Mediterranean off Egypt, BP has become the operator of the offshore North Alexandria and West Mediterranean Deepwater concessions.
  • In the South China Sea off China, BP has acquired a 40.82 percent stake in a block that will be operated by Chevron during the exploration phase.
  • BP also concluded agreements with the Indonesia Government in relation to the West Sanga Sanga exploration area and a cross assignment of acreage interests with ExxonMobil in deepwater in the Canadian Beaufort Sea.