Equinor has abandoned a A$200m ($132m) plan to drill for oil and gas in the deep waters of an Australian marine park deeming it not commercially feasible, the third energy group to pull out of the controversial project.
The decision by the Norwegian state-backed oil and gas company follows the earlier withdrawal by oil majors Chevron and BP from drilling the Great Australian Bight marine park — a pristine stretch of ocean off the coast of South Australia that is a sanctuary for whales and other protected species.
In December Melbourne-based Karoon Gas also said it would relinquish its exploration permits following strong opposition from environmental groups to drilling in the park.
Equinor’s withdrawal is a setback for Australian government efforts to boost offshore gas production amid concerns that the country, one of the world’s biggest exporters of liquefied natural gas, faces a potential domestic gas shortage in east coast states in coming years.
Jone Stangeland, Equinor’s country manager for Australia, said on Tuesday that the company had concluded that the project was “not commercially competitive” compared with other exploration opportunities in the country.
The global oil and gas industry has slashed spending on deep water exploration due to lower oil prices and the challenges of making a profit from riskier and more complex projects in recent years.
In 2015 Royal Dutch Shell abandoned plans to drill for oil and gas in the Arctic, while Exxon withdrew from most of its joint ventures with Rosneft to explore in the Arctic and Black Sea, a tie-up that was hit by US sanctions on Russia.
Appea, an oil and gas lobby group, said: “Equinor’s decision to not continue its Great Australian Bight exploration program is disappointing — for the wider Australian community who need new local energy supply, and for South Australians who would have benefited from the economic activity.”
But Equinor’s decision was cheered by environmentalists, who oppose drilling due to fears it could result in a damaging oil spill in a sensitive maritime area.
Greenpeace welcomed the decision by Equinor and thanked local campaigners, the seafood industry and tourism operators who have led vocal opposition to the proposed drilling programme.
“The only way to protect coastal communities and the Great Australian Bight’s unique marine life is to rule out drilling permanently,” said David Ritter, chief executive of Greenpeace Australia Pacific. “The world’s climate cannot afford to open disastrous new oil frontiers”.
Three companies — Santos, Murphy Oil and Bight Petroleum — still hold exploration licences to drill in the Bight but analysts said the withdrawal of three oil majors dealt a blow to exploration efforts in the region.
Saul Kavonic, an analyst at Credit Suisse, said: “The Great Australian Bight is one of the last true wildcatter exploration areas in the region. The withdrawal of Equinor could prove the death-knell for frontier deepwater exploration in Australia, as other market participants with neighbouring acreage were looking to piggy back off Equinor’s efforts.”