Exxon cans Bass Strait sale after bids fall short
ExxonMobil has canned the multi-billion dollar sale of its Bass Strait gas fields stake, with offers thought to have fallen well short of expectations.
ExxonMobil has canned the multi-billion dollar sale of its 50 per cent stake in the Bass Strait gas fields offshore Victoria, with prices from potential bidders thought to have fallen well short of expectations.
The US energy giant announced its intention to sell its half share in September 2019, in a move that would have brought an end to a multi-decade venture with partner BHP, which is a major supplier of gas to Australia’s east coast market.
However, from the start some suitors saw the cost of cleaning up the ageing assets as a roadblock to the sale.
Exxon said it would now keep the energy assets on its books, ending the sales process.
“After completing an extensive market evaluation, ExxonMobil has decided to retain its operated Gippsland Basin producing assets in Australia,” Exxon said in a statement on Friday.
“Projects in our portfolio are evaluated for robustness against competition, internal alternative investments and across a range of prices and scenarios. We believe Gippsland Basin and the Kipper unit are more valuable as part of our portfolio and we will continue to operate rather than divest.”
The decision may now raise doubts over whether BHP will proceed with its own sale after the resources operator signalled it would sell out of its non-operating 50 per cent stake.
BHP said it would assess Exxon’s decision and its own mooted sale.
“We continue to assess our divestment plans for Bass Strait,” a BHP spokesman said.
“This is a complex process and will take time, and we will consider the implications of recent announcements. While that work is ongoing, we will continue to work closely with the operator to deliver gas and liquids to customers, and generate value for the community and our shareholders.”
Several analysts have previously raised the issue of hefty liabilities to clean up the historic oil and gas assets, likely to run into the billions of dollars, and potentially ruling out some suitors worried about abandonment risks.
Exxon‘s assets up for sale had included offshore oil and gas facilities along with the Longford and Long Island Point plants in Victoria. It follows an unsuccessful bid by the energy duo to sell declining oilfields in the Strait back in 2016 with hefty remediation costs seen as a major obstacle for buyers.
Since the 1960s, Exxon has produced more than 4 billion barrels of oil from Bass Strait, which at its peak was producing 500,000 barrels of oil a day, making it one of the world’s biggest producing regions.
Exxon now produces just one-tenth of the volume of oil it was pumping in the 1980s from the Bass Strait while its big legacy gas fields — Marlin, Barracouta and Snapper — are also on their last legs.
Although the Bass Strait remains eastern Australia‘s biggest gas player, its share of the market has fallen by about a third in the last few years sparking a costly hunt for new resources.
Beach, backed by billionaire Kerry Stokes, is seen as a top contender for the assets while Santos could also be tempted although more likely as part of a consortium potentially, according to Credit Suisse.
Exxon in September started a voluntary redundancy program for its Australian staff after warning of unprecedented market conditions following the oil rout earlier in the year.
The US major considered backing a potential LNG import plant to meet market demand, but dropped that plan a year ago blaming insufficient interest from customers to sign long-term contracts.
Exxon also operates Victoria’s Altona refinery, one of only four refineries still operating in Australia, but has signalled doubts over its future with the facility trading at a loss.
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