BP to take $200m Aussie hit

BP has abandoned plans to drill for oil off the coast of southern Australia in a move which delighted environmentalists, but is likely to cost the company up to $200 million (£162.7 million).

The FTSE 100 firm won licences to explore the Great Australian Bight off the coast of Adelaide in 2011, when the oil price was around $110, in a bid to tap the 1.9 billion barrels thought to lie below the sea bed.

But the plunge in the price of oil to less than half that level in the past two years had made exploring in the region too much of an expensive risk, prompting the blue-chip to pull out.

Claire Fitzpatrick, BP’s managing director for exploration and production in Australia, said the decision had been “incredibly difficult”.

She added: “We have looked long and hard at our exploration plans for the Great Australian Bight but, in the current external environment, we will only pursue frontier exploration opportunities if they are competitive and aligned to our strategic goals.”

BP, led by Bob Dudley, had planned to drill exploration wells next year after being awarded licences for four blocks in the Ceduna area of the Bight and commissioned a rig.

But the lack of infrastructure such as pipelines and a terminal meant production could have been more than five years away.

BP, which has sliced its exploration budget by two thirds to $1 billion since 2013, is instead focusing more-limited resources on shorter-term exploration.

It is understood the company will write off up to $200 million in costs such as seismic exploration.

Other majors such as Chevron still have exploration licences in the region.

Greenpeace Australia said: “This will come as a huge relief to anyone whose business relies on clean, green seas in the Great Australian Bight, to the fishing communities, to the tourism industry and it is a huge victory for them,” he said.

Oil prices hit a year high of $53 a barrel today, helping BP’s shares edge 1.5p ahead to 496p.