BP wins 1st Australian oil exploration permits

[January 17, 2011]  CANBERRA, Australia (AP) -- BP has been given its first-ever oil exploration permits off the Australian coast, but the government warned Monday that the London-based energy giant will have to demonstrate higher safety standards than it had applied in the Gulf of Mexico oil disaster before it is allowed to drill.

BP holds stakes in the Northwest Shelf and Gorgon natural gas fields in Western Australia state but has never before applied for its own offshore exploration permits in Australia.

Resources and Energy Minister Martin Ferguson said BP has been awarded four of seven offshore exploration permits approved by the government as part of an annual tender process.

BP will be allowed to explore to depths exceeding 15,000 feet (4,600 meters) off the coast of South Australia state. The other three permits awarded to Australian companies Woodside Energy, Riverina Energy and Finder No. 4 are off Western Australia.

"This is a material and early move into an unexplored deepwater basin," Mike Daly, executive vice president of BP's exploration business, said in a statement.

Oil companies are facing increased scrutiny in the United States after an explosion and spill at BP's Deepwater Horizon rig in the Gulf of Mexico killed 11 workers on April 20 last year and caused massive environmental damage to the U.S. coast.

"The permits awarded to BP follow an extensive assessment and due diligence process that examined the technical and financial competence of BP to undertake the proposed work program in accordance with the stringent requirements of Australian legislation," Ferguson said in a statement.

"Additional conditions have also been attached to these permits, emphasizing the need for oil field best practice behavior by the operator," he said. "This reinforces BP's undertaking, given as part of the assessment process, to fully integrate lessons learned from the Deepwater Horizon incident into its systems and processes."

Democrats in Washington pledged this month to push for tougher regulation of offshore drilling in the United States and to make oil companies more financially responsible for spills -- steps a U.S. presidential panel says are necessary to prevent another catastrophic blowout.

BP spokesman Jamie Jardine said the company had applied for the permits before it lost its rig in the worst offshore spill in U.S. history.

"It's a strategy that's been developed for a long time," Jardine said.

"We're in the business of looking for and developing large scale oil fields and because of our size, we're able to take significant commercial risks," he said, referring to the risk of failing to find oil.

Australia is also toughening regulations on its offshore oil and gas industry following the Gulf of Mexico spill and Australia's own worst-ever oil spill on Aug. 21, 2009. More than 400 barrels of oil spilled a day for 11 weeks from the Montara field off north Australia. A government report in November last year laid part of the blame on a lax state government regulator.

Ferguson said the government planned to replace state regulators with a national regulator of the offshore energy industry by January 2012. BP would not start drilling exploration wells until 2013 or 2014.

The Australian oil and gas industry is growing largely due to Asian energy demand. There have been more than 3,000 wells drilled in Australian waters since 1964.

[Associated Press; By ROD McGUIRK]

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