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No Signs of Industry Cost Creep Setback to Spending Plans: BP Executive

Published in Oil Industry News on Thursday, 7 February 2019


Graphic for News Item: No Signs of Industry Cost Creep Setback to Spending Plans: BP Executive

Upstream industry costs remain stable at levels well below 2014 levels and have even dipped recently in the US shale basins tracking oil prices lower since late last year, the head of BP's upstream division Bermand Looney said Tuesday.

BP upstream production costs per barrel rose by less than 0.5% last year, but overall, production costs remains 45% lower than 2013 levels of around $13.10/ b of oil equivalent, Looney told analysts on a quarterly earnings calls.

"We are not seeing cost inflation around the world, and in fact, even in the Lower 48 we are starting to see deflation as prices have started to come back down of their peaks," Looney said referring to the 48 US contiguous onshore states which hold the country's shale plays.

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BP completed its $10.5-billion acquisition of BHP's US shale assets in November, adding 190,000 boe/d of new oil and gas production in the prime, liquids-rich Permian Basin and Eagle Ford Shale plays.

At the time, BP said it expected its crude and gas flows from the deal to improve its already market-leading underlying annual production growth target of 5% on average to 2021.

Looney said while BP is continuing to drive unit costs down in 2019, he sees per barrel costs largely flat this year at around $7.15/boe due to the higher costs of BHP's liquids shale production in the US.

"We are not seeing any cost inflation in either in capex or opex, we continue to push for better industry solutions and standardization, and push for costs to come down," Looney said.

Concerns over creeping industry costs as oil prices recover have made some stock watchers cautious over the deliverability of producer's upstream volume targets given the sector's insistence on capital prudence and spending discipline.

LONG-TERM GROWTH

BP earlier reported a 1.8% growth in production during the fourth quarter to 2.63 million boe/d, following start-ups at a raft of major new oil and gas fields. The oil major said it was on track to deliver 900,000 boe/d of new production by 2021 compared with 2015, under targets laid out two years ago.

This year, BP is planning to start up a further five major projects, and take final investment decisions on up to seven more projects on the Gulf of Mexico, the North Sea and India to support upstream growth beyond 2021.

Longer term, Loony said BP expects to be able to grow its upstream base over the coming decade while remaining focused on "quality and value."

BP has around 50 billion barrels of discovered resources, he said, of which half is already part of BP's current development plans as both proved non-proved resources.

Source: www.spglobal.com

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