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Why Crude Quality Matters

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BP Seeks Partner To Explore Waters Off Southern Australia

While Royal Dutch Shell is determined to explore the Arctic for energy, rival BP is looking south, proceeding with its plan, expected to cost more than US$1 billion, to explore in the Great Australian Bight, the open bay off the continent’s southern coast.

Because of the persistently low price of oil, BP has reduced exploration in some areas, but Bryan Ritchie, BP’s director of exploration for Asia-Pacific, said in Melbourne on May 18 that it chose to move ahead with its work off Australia because of the potential financial payoff.

But to keep drilling costs under control, Ritchie said, the British energy company wants another partner. It now holds a 70 percent share in the drilling site about 125 miles off the coast of the Australian state of South Australia. The remaining 30 percent is held by Norway’s state-run Statoil.

Related: U.S. Could Go All Out On Offshore Exploration

Ritchie said BP was prepared to sell a portion of its share to a second partner in what is called a “farm-out.” He said BP is willing to reduce its holding in the venture to 50 percent or even 40 percent to keep spending manageable and improve operational efficiency.

Drilling is expected to begin at Stromlo, the first of four planned offshore wells, but work there won’t begin until October 2016, once the worst of the winter is over in the waters of the Southern Hemisphere.

“If this works, it will be large and will open up a new petroleum province that will be producing for a number of years to come,” Ritchie said, though he stressed that there is no guarantee of success. After all, he said, the rate of finding oil so far has been only about 10 percent.

Related: Goldman Sachs Predicting $45 Oil By October

Two previous BP efforts in the region were failures, but the company believes that is because the drilling didn’t go deep enough. So the company says it plans to drill more than a mile beneath the floor of the bay, which already is 1.2 miles beneath sea level. BP is paying US$755 million to a South Korean company to build a special drill rig, called the ‘Great White’, which is designed specifically for this project.

Ever since 2011, when Australia’s federal government opened up the Great Australian Bight for energy exploration and production, BP has been actively working to exploit the region, along with Chevron, Murphy Oil, Santos and Statoil.

But any drilling venture in the bight faces more than uncertainty about unproven energy reserves. As with Shell’s plans in the Arctic, BP’s initiative in the bight has drawn strong resistance from environmental groups concerned about how drilling and perhaps even an accident might affect the habitat of marine wildlife.

Related: What Is The Future For Saudi Aramco?

On May 16, the same day “kayactivists” held a large but good-natured demonstration in Seattle’s Elliott Bay to protest Shell’s Arctic venture, about 100 environmentalists coordinated by the Wilderness Society held a protest at Glenelg Beach in Adelaide, on Australia’s southern coast.

One of the leaders of the protest, Peter Owen, the Wilderness Society’s South Australia director, said that he feared a disaster, given BP’s involvement in the Deepwater Horizon explosion and oil spill in the Gulf of Mexico in 2010. “We don’t need a Gulf of Mexico disaster in the Great Australian Bight.” he said.

Ritchie said he and his colleagues understood the protesters’ concern, and emphasized that BP was conducting all the required pre-drilling studies to ensure that the company’s work was conducted safely and with minimal impact on the environment.

By Andy Tully of Oilprice.com

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