BAKU, Azerbaijan, Oct.6
By Leman Zeynalova – Trend:
The scale and speed of the transition BP is undertaking is without precedent, Trend reports citing Westwood Global Energy Group.
BP followed up the release of its Energy Outlook with a ‘BP Week’ of strategy presentations intended to flesh out its ‘Net Zero in 2050’ ambitions announced in February this year. A key ambition is to be ‘net zero on an absolute basis across the carbon content of our upstream oil and gas production by 2050 or sooner.’
“Ignoring Rosneft, the cut in production from 2.6 to 1.5 mmboe/d means that BP will be producing 400 million fewer barrels of oil equivalent per year in 2030. BP indicated that it would ‘manage the R/P ratio down to 8 years’. R/P ratio was around 11 years at end 2019. BP has indicated that it will cut E&P capex from ~$12bn in 2019 to ~$8bn in the 2021-2025 period. Oil projects will need a payback period of <10 years and gas projects <15 years to be sanctioned. Average point forward development costs are estimated at $9/boe.
“BP would produce 8 billion barrels of oil equivalent over the next ten years, excluding Rosneft, assuming a linear decrease in production to the 1.5 mmboe/d target in 2030. This compares to reported net proved developed reserves at end 2019 of 6 bnboe. An R/P ratio of 8 in 2030 with production of 1.5 mmboe/d would imply proved reserves of 4.4 bnboe. BP stated it had 16 bnboe of ‘resources’ in the strategy presentation, therefore, in theory only 6 bnboe of this resource would be need to be moved to reserves over the next 10 years. BP therefore has currently more than enough discovered resource to replace reserves without exploration.
“Exploration spending will be cut to $350-400 million per annum with a focus on new hubs in existing areas. The strategy appears to be to maintain a hopper of 400 million boe risked volume net to BP. Examples of near-term drilling that fit this description include the Ironbark gas prospect on the NW Shelf of Australia, the Shafag Asimam gas prospect in Azerbaijan and Galapagos Deep frontier oil prospect in the Gulf of Mexico which have been on BP’s books for many years. There will be no new country entries and presumably also exits from acreage that no longer fits the strategy. In 2019 BP reported spend of $1.3bn of E&A ($800m exploration only) and said exploration and acreage access capital peaked at $4.6bn in 2010. This a significant chunk taken out of the global exploration budget and marks the end of BP as a major player in exploration,” the company said.
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