Equinor’s decision to abandon drilling in the Bight is disappointing but not surprising. Disappointing because Australia imports one million barrels of oil per day to meet its thirst for petrol, diesel and jet fuel. Disappointing also because of the loss of potential economic benefits for South Australia.
Not surprising because of the cost of drilling a wildcat exploration well in the vast, unexplored area of the GAB, with high geological risk. Not helped also by lower oil prices and tougher carbon emissions targets for European companies. Earlier this month, Equinor announced it would include Scope 3 in its emission reduction target (50% cut in net carbon intensity by 2050). Carbon costs are starting to bite and the European companies appear to be setting higher hurdles for oil projects (the Bight was definitely an oil target, not gas) than gas. For example, OMV sold out of Tui in NZ in the past quarter because it said it was shifting away from oil. Repsol in December announced a US$5.3 billion write down, reflecting lower values it sees for oil and gas, and said it would redirect investment into renewables. It has set a net zero target by 2050, and BP has since followed. Repsol didn’t appear to single out oil, but the logical conclusion is oil would be at the top of the reject list because of its higher carbon intensity. This is another example of European influence on investment globally, similarly to the decisions by the European Investment Bank to no longer invest in fossil fuel projects in poor developing countries.
Quoted in Financial Times https://www.ft.com/content/7af6c64a-5767-11ea-abe5-8e03987b7b20