To drill or not to drill in Australia
National-Liberal coalition aims to open drilling in the ecologically delicate Great Australian Bight, a move aimed to boost energy security and win votes at upcoming elections
Australia’s government is expected to allow oil drilling in the fragile Great Australian Bight eco-system in a bid to boost fuel security, a decision that will inevitably inflame the nation’s electoral politics.
Fears of a potential US-China conflict in the South China Sea have exposed Australia’s vulnerability to supply disruptions, prompting an assessment of its gasoline, diesel and jet fuel supplies that is due to be released in mid-year.
Resources Minister Matt Canavan has predicted that development of the vast Bight region could “transform the South Australian economy, and lead to thousands of jobs and billions of dollars of income to Australians.”
But scientists and environmentalists warn that an oil well blowout would likely cause more damage than the 2010 Deepwater Horizon disaster in the Gulf of Mexico, which resulted in a final cleanup bill of US$60 billion. One reason is the reef’s isolation, which would delay remedial measures.
“It’s extraordinary that we’re about to put this ecosystem at risk when we know so little about it,” Nathaniel Pelle of Greenpeace Australia told Fairfax. “Wherever there is drilling then accidents are inevitable. It’s only a matter of how bad they are and where and when they are to occur.”
Often called the Great Southern Reef because of its similarities to the Great Barrier Reef in Queensland, the region is an open bay (bight) in the Indian Ocean stretching along the Western and South Australia coasts.
It was formed 50 million years ago when a chunk of land split off from the super continent of Gondwana. Drifting further south, this land mass would eventually freeze into an ice shelf and become Antarctica.
There is no clear picture of the Bight’s scale because of varying definitions of where it starts and ends, but the most conservative estimate is that it covers a distance of 1,160 kilometers.
There is, however, a consensus on its ecological value for species transiting through the Southern Ocean.
BP, the energy giant that owned Deepwater Horizon, stopped exploration in the Bight in 2016 after funding a research project that found there were 1,267 species of bird and marine life, with 32% of these new to science.
BP had forecast the Bight would yield as much oil as the Mississippi delta in the United States.
Chevron also pulled out of the Bight in late 2017 after a concerted campaign by the fishing and tourism sectors to block drilling. The company said it was a commercial decision and was not due to government policy, regulatory, community or environmental concerns.
The reef contributes about US$7.2 billion to the economy each year through these two industries.
However, nine more oil exploration permits have been granted, and at least one firm, Norway’s Equinor — formerly known as Statoil— is likely to start drilling later this year if it gets the green light, which now seems inevitable.
The ruling Liberal-Nationals government is desperately looking for an economic vote-puller to avoid a wipeout in the election due to be called by April, and jobs are a big issue.
South Australia has lost much of its industrial base with the closure of automotive assembly and steel plants, while mining-dependent Western Australia has struggled since the global commodity boom ended.
The government will also exploit public concern over the fuel security situation. As of mid-2018, the latest data, there was enough gasoline in stock for only 21 days of supply, with 16 days of diesel and 19 days of aviation fuel. All are below global benchmarks.
These figures do not include crude oil stored at refineries within Australia, which amounted to 26 days of supply, or fuel on ships that are en route to the country. The latter is excluded because it might not actually arrive.
Australia is able to produce much of the crude oil it needs, but 75% is sent to refineries in Asia and then imported back. That’s because it is extracted from offshore fields in the remote northwest that are too distant from the main markets in the east.
Another factor is that the grades of oil produced in Australia are not well suited for processing at domestic refineries.
As a consequence, Australia imports three-quarters of its crude oil and 55% of refined gasoline, a vulnerability that could prove disastrous if key maritime corridors like the South China Sea were to become impassable.
That explains the country’s recent decision to step up patrols in the contested waterway as part of a US-led alliance opposing China’s militarization of dredged atolls in the sea.
Refined fuels are shipped to Australia from South Korea, Singapore, Japan, Malaysia and China, while Malaysia, the United Arab Emirates, Indonesia, Gabon and New Zealand supply most of its crude oil requirements.
Oil and gas extracted from the Bight could be piped straight to refineries in eastern states, but much might still end up in Asia if it is also unsuitable for domestic processing. Either way, it is unlikely the Bight will overcome the fuel security issue, as the exports focus has eroded refining capacity.
Environmentalists will try to make the Bight’s future an election issue, and have won strong support since a document leaked from Equinor revealed that any potential blowout in an oil well could leak for more than 100 days and pollute beaches as far distant as northern New South Wales.
It would spill up to 4.3 million barrels of oil, far more than occurred with Deepwater Horizon, the document revealed.
Equinor, which had offshore drilling incidents in Europe in 2010 and 2016, said the document was not finalized and was based on 100 simulations in different conditions “without any response action taken” by the company.
“We would not undertake any drilling activity if this was a realistic outcome,” said Jone Stangeland, Equinor Australia’s manager, noting the company had so far drilled 6,000 wells off Norway without any coastal pollution.