Firm loses oil drilling licence off Rotto

A Melbourne-based company has lost its licence for a potentially lucrative oil and gas field off Rottnest Island, likely ending the prospects the area will be explored again.

In another significant flexing of the Federal Government's "use it or lose it" provisions, Nexus Energy has had its six-year-old exploration permit torn up.

The West Australian understands that the decision, which will be gazetted today, was prompted by the company's failure to drill an exploration well within the required time frame, which expired at the end of last year.

Nexus Energy's exploration permit, granted in 2005, covered a 1875sqkm area of some of the most pristine waters including the Perth Canyon, a biodiversity hot spot and one of only three places in Australia where the blue whale is known to feed.

The company's lease extended to an area 7km north-west of Rottnest and 10km from Perth's northern beaches.

Last year’s Gulf of Mexico disaster prompted resurgent opposition to oil and gas exploration off Rottnest Island.

The WA Conservation Council warned that a spill would ruin some of the world’s best beaches and destroy the oil industry’s reputation.

The cancellation of the lease potentially jeopardises Nexus Energy’s chances of securing future exploration licences.

Federal Resources Minister Martin Ferguson, along with WA authorities, will now have to consider whether to re-release the acreage.

But it is increasingly likely that the controversy attached to reopening the area to exploration would deter Federal and State authorities from re-listing it.

Nexus Energy believes there are 200 million barrels of oil beneath the area.