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Gas giants ExxonMobil, Woodside pause exploration as oil crash, coronavirus hit

Energy giants have frozen exploration work in two of Australia’s most prolific gas basins as the industry cuts costs amid tumbling oil prices and falling demand from the coronavirus pandemic.

ExxonMobil has halted planned drilling in the Bass Strait offshore Victoria while Woodside Petroleum cancelled part of a seismic survey offshore Western Australia which aimed to provide data for new gas field developments.

The US energy giant said it will pause drilling work off the southeast coast of Australia for the rest of the year due to COVID-19 related challenges.

“These are unprecedented times and we’ve had to adjust work plans so we can focus on keeping our workforce safe, and maintain our critical operations and supply of energy to Australia,” Exxon’s Australian chairman Nathan Fay said.

Drilling on two West Barracouta wells jointly owned with BHP has been completed.

Exxon slashed global spending by $US10bn ($15.6bn) earlier in April as part of a wave of cost cutting being undertaken by energy companies seeking to protect their balance sheets due to plunging oil prices.

The Bass Strait gas fields have provided up to 40 per cent of east coast production but are now in decline, sparking fears of a supply shortfall for Victorian users by 2023 unless new supply sources can be discovered.

Record supply cuts by OPEC and oil producing nations over the weekend have failed to revive the crude market with a 30 per cent fall in demand sending Brent oil to $US30 a barrel following a steep fall overnight.

Woodside has also started to put cuts into action after saying half its spending would be withdrawn this year.

It cancelled “a short project” included in a major 4D seismic survey covering its Pluto, Brunello, Laverda, Cimatti and Vincent fields, according to contractor Shearwater GeoServices.

“The projects are terminated as per client’s rights within the respective contracts,” Shearwater said.

The original seismic deal struck in November aimed to boost Woodside’s understanding of the fields’ performance along with data to guide future field developments.

East coast gas producer Senex Energy, which operates in Queensland’s Surat Basin and South Australia’s Cooper Basin, said the rapid change in the oil market had forced spending cuts across the board.

“On the supply side with low oil prices it is doubly felt because you’re getting this cratering of not only oil prices but also traditional demand,” Senex chief executive Ian Davies told analysts on Wednesday after its quarterly results.

“There’s no doubt from the conversations we’ve been having there is an appreciation that every company is going to pull back capital expenditure. And that’s almost without exception.”

Still, Australian energy producers were better placed than in the 2015 oil crash to work their way through market unrest, the Senex chief said.

“The balance sheets of companies are quite a bit stronger this time round obviously. But in the last few weeks even very bullish exploration and production companies have very quickly been pulling back and deferring and saying actually this is going to be here for a while. That will obviously come through the supply and demand dynamic.”

The east coast gas market has softened, partly due to Queensland LNG producers sending supplies down to southern markets, but Senex expects it to tighten over the long-term.

“There is obviously short-term softness,” Mr Davies said. “Longer-term I can’t help but think that demand globally picks up pretty materially and also with the capex pullbacks we are heading for a very strong east coast gas market.”

Source: The Australian