BP's oil search strategy shrinks with budget cuts

Mon May 23, 2016 2:08am EDT
 
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By Ron Bousso and Dmitry Zhdannikov

LONDON (Reuters) - The surprise departure of BP's exploration boss has turned the spotlight on an oil search strategy that, after years of spending cuts, is focusing mainly on expanding existing fields rather than venturing expensively into the unknown.

That caution reflects a firm chastened by the $55 billion cost of its 2010 Gulf of Mexico spill, and needing to squeeze every last drop out of a sharply reduced exploration budget at a time of low oil prices.

"Exploration doesn't necessarily have to look like (nature broadcaster) David Attenborough standing on a brand new frontier," a BP source told Reuters.

While BP's total reserves and fields coming onstream in the next four years look healthy compared to the other majors, its long-term project pipeline is the slimmest among its peers and its break-even costs are the highest, according to some analysts, among them Macquarie.

Several BP sources said Chief Executive Bob Dudley and his team were hammering out a new long-term strategy, with investors expecting an update on its post-2020 plans later this year or early next. The plan is likely to chime with a phrase that Dudley is fond of using: "Big is not necessarily beautiful."

After asset sales forced on it by the Gulf disaster shrank the company by a third, BP is today focusing its operations on five regions -- Angola, Azerbaijan, Egypt, the Gulf of Mexico and the North Sea.

It was in Angola, Egypt and the North Sea, already BP core regions, that Richard Herbert notched up his main successes during his two years as head of exploration.

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A BP logo is seen at a petrol station in London, Britain January 15, 2015.   REUTERS/Luke MacGregor/File Photo