BHP to sell stake in Exxon-operated Bass Strait joint venture

Energy giant BHP has revealed plans to sell its 50 per cent stake in the Bass Strait oil and gas venture to enable focusing on higher-value petroleum assets.

The Bass Strait joint venture is co-owned and operated by ExxonMobil. The Bass Strait is kind of unwanted at the moment as ExxonMobil also put up its 50 per cent stake for sale in September 2019. It is estimated that the stake could fetch up to $3 billion.

BHP said on Tuesday in its financial results statement that the company was continuing to optimize its petroleum portfolio through the exit of later life assets, including an intended exit from the Bass Strait.

It is worth noting that the Bass Strait oil and gas fields off Australia’s southeastern coast have produced more than 4 billion barrels of crude oil and about 8 trillion cubic feet of gas over the past 50 years and now face a steep decline.

At $1.1 billion, the Bass Strait was the biggest single contributor to BHP’s petroleum revenue in the year to June 2020, but that is a drop from a $1.6 billion annual contribution in 2010.

According to Reuters, which quoted analyst opinions, BHP might be able to sell its stake before ExxonMobil since its interest might attract more bidders as it is not the operator of the field.

Another thing related to the sale is the risk regarding abandonment liabilities which are deemed as significant.

Regulators will most likely watch the sale very closely because of the case of the North Oil & Gas Australia (NOGA) company.

Namely, the small company bought an ageing field in 2016 which came with $156 million in abandonment liabilities, but then went into voluntary administration last year. The decommissioning costs for the Bass Strait assets are estimated to be many times higher than that.

Credit Suisse analyst Saul Kavonic told Reuters that there will be heightened regulatory scrutiny over any potential buy due to the high abandonment costs and anyone’s ability to meet them.

This, according to Kavonic, could drastically limit the pool of buyers for Bass Strait interests.