Energy Sector Update for 03/06/2018: BP

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BP's chief executive, Bob Dudley, said he expects oil prices to stay within the range established over the past six months or so, since the Group of 24 producers' output restraint deal started to eat into the world crude inventory glut.

"It feels like we're in a $50-to-$65 [per barrel] world for quite a long time," Dudley said, speaking at the CeraWeek industry gathering in Houston. He added that having been through a deep slump from 2014 through 2016 it now feels as though the market is "on the fairway," i.e., it has found some level of stability, with surging U.S. output expected to keep a cap on prices and the Group of 24 deal underpinning them until demand catches up.

Dudley said BP doesn't have company output targets -- "It's value over volume" -- but added he does expect to see "significant" volume increase over the next several years. [Last year, BP had a record increase of 12 per cent in oil and gas production to 2.47m barrels of oil equivalent. It is scheduled to start production from six new projects this year, including Egypt, Azerbaijan and UK North Sea, helping boost production by 900,000 boe/d by 2021, mostly natural gas.]

He cited a number of the company's operating areas, such as Brazil, West Africa (where it is operator on a major new gas find on the marine borders of Senegal and Mauritania), but highlighted also the aging North Sea provinces.

"You'll see a renaissance now after many, many years [when] the cost structure had gotten out of control," he predicted. There has been a "remarkable very, very painful restructuring [in] Aberdeen, Norway...People now are very, very efficient about what they do and think about every dollar, krone, pound they spend. The cost efficiencies have got to stay."

Dudley also touched on the investment BP announced in Jan. to expand its network of electric vehicles recharging centers in the UK and other northern European markets, which he said numbers about 70. The aim is to get "ultra-fast recharging" down from about 20-to-30 minutes currently for large passenger vehicles to about 8 minutes, but that combining EV recharging with retail "is a really good business model."

Nonetheless, "EVs are not the silver bullet everyone is looking reduce emissions," he said. That would come mainly from the power sector, replacing coal with gas, which has reduced U.S. emissions back to early 1990s levels, as well as from the agriculture sector, he predicted.

(First Oil reports are produced by MT Newswires' global team of oil reporters. This story is also disseminated in real time to energy industry professionals via the First Oil Chat service on the ICE Instant Message application.)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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