BP CAN $50
PLATTS wrote, BP can now balance the books in 2017 at "just south of $55/barrel" compared to its previous guidance of $60/barrel thanks to greater cost discipline, CEO Bob Dudley said at the Oil & Money conference in London on Tuesday.
"We can operate in the $50 range, we have to," he said, adding that the business needs to be resilient to price cycles, can adapt and is agile.
"In practical terms, this means standardizing what we do, make things safer, simpler, and cheaper," Dudley said.
He warned that while demand may be strong, supply is even stronger and this has led to a renewed focus on competitiveness.
Dudley also said the market is essentially in balance and "as long as oil demand grows at 1-1.2 million b/d we're going to see a tightening. There's probably 18 months of storage out there."
"We'll see a steady tightening of the price. Next year...somewhere between $50 and $60 next year. We can plan our company against $50-60 next year. That feels right, the fact that the OPEC members are talking to each other and have reached some understandings...is just a further sign of tightening of the market," Dudley said.
"Investments are back, but it's only the very best investments," he said, adding that "some frontier exploration near infrastructure is acceptable, but really big long term infrastructures, deepwater frontier is probably not on the cards right now for us."
Earlier this month BP announced it was shelving plans for offshore frontier exploration drilling in the Great Australian Bight as it was neither competitive nor aligned with its strategic goals.
Dudley was keen to stress that cost savings being made in the current price environment need to be sustained, stating that the goal is for 75% of cost reductions to stick if or when prices rebound. Thanks to new technology this is possible, Dudley said, adding as an example that "in the seismic imagining area what took four-five months now literally takes minutes".
He said the oil industry has been impacted by its own success, particularly in the shale industry, but said demand would keep growing by about one-third by 2035.
He said the focus of BP was shifting, with natural gas set to make up 60% of its portfolio from the current 50% by the end of the decade and renewables coming further into the fuel mix in the decades ahead.
The BP CEO was guarded over investment in certain projects, stressing again the efficient use of capital and the competition for that capital.
Regarding BP's Abu Dhabi offshore concession renewal when it comes up in 2018, he said that "we will evaluate", highlighting the difficulty of the economics. "We would like to keep working in the offshore areas and the UAE but again this has to compete for our capital," Dudley added.
In March 2018 there is the expiration of the existing Adma-Opco concession, held 60% by Adnoc with international partners BP (14.67%), Total (13.33%) and Japan Oil Development Co. (Jodco) (12%).
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