The deepwater Gulf of Mexico will serve as the "central element" of BP PLC's growth strategy in the medium and long term, according to BP Chief Executive John Browne.
The company intends to spend close to $15 billion on its deepwater gulf operations during the next decade, Browne noted in a talk to the Houston Forum earlier this month. Most of this will be spent drilling wells and developing fields that have already been discovered, he added.
Also, oil and gas companies, like many US corporations within other industries, are going to have to work very hard to reestablish public trust, Browne claimed. The public's trust in companies has deteriorated in recent months due to investigations into companies' financial record-keeping and other operational procedures. Once trust is reestablished, Browne said, the security of energy supplies in the US will follow suit.
Following his speech, Browne fielded questions from the Houston audience about the probability and appropriateness of opening up the Arctic National Wildlife Refuge coastal plain in Alaska to exploration and development, Russia's future role as a world oil producer, and the decline of reserves in the Middle East.
Deepwater exploration
Regarding pure exploration projects in the deepwater gulf, Browne said that BP aims to drill four to seven "real" exploratory test wells/year. "That doesn't sound like a lot," he said, "but they are really very expensive tests."
The critical point in conducting such tests, he added, is to take the time to conduct the required analysis for each well. "Time spent in analysis and planning is well-rewarded, especially when the risks taken on drilling one exploration well can run up to $100 million," Browne said.
BP is the largest acreage-holder in the deepwater gulf, with more than 650 gross blocks in water depths greater than 1,500 ft, and it holds one third of all of the deepwater gulf reserves that have been discovered to date. Browne said that technologies developed in the deepwater gulf will play a pivotal role in the fast-track development of deepwater areas elsewhere in the world.
Energy security
"I believe the events of the last year-the many, many events of the last 12 months-have reminded us all about what really matters about friendship and about security, about the importance of trust, and about the crucial responsibility of leadership, which falls on business and on the energy industry in general," Browne said. "The next few months will be very important. I have no doubt of the outcome, though I'm sure that there will be many difficulties and complexities."
Browne said that, according to a recent independent poll, 84% of those asked said they did not trust what companies told them, which he found "deeply concerning." Brown added, "Trust comes not from size, or from words, but from practical action."
One element that will restore trust will come from "a track record of delivery, which "must take place within a framework of rules," he said. Trust will also come from a company demonstrating a "practical commitment" to being fair and impartial. For this reason, Browne said that BP has withdrawn totally from the funding of any political causes, even in the US. "We'll take no part in partisan activity," Browne said.
In addition, the US will have to focus on the security of its energy supply, because there is "no shortage of resources," for there is much oil and gas left to be found, Browne stated. The challenge will be to make sure that these new resources are secure, he said.
There is great potential for the US to gain access to diverse sources of energy, Browne noted.
He said that during 2001, the US imported 55% of its oil, which came from 60 countries-but none of the suppliers accounted for as much as 16% of the total, he added, quoting from BP's most recent annual statistical review of world energy (OGJ Online, July 10, 2002).
Opening of ANWR
Browne stated that the issue of opening ANWR's coastal plain to E&D is a "debate of principle" between the value of wilderness and the value of energy that should be decided by the electorate and not something that oil and gas companies should try to solve.
"We (as an industry) have a track record of being able to develop sensitively and sympathetically in some very sensitive areas of the world. Do we make mistakes? Of course we do. But we learn from them, and we can therefore comment to say that if this area were to be opened, it probably could be developed in the right way to produce whatever oil that was there," he said.
Russia, Middle East role
In noting Russia's evolving role in the supply of the world's oil, Browne said that it is first important to remember that Russia produces less oil than the US-to keep that in context when assessing its importance.
Russia has been through some "wrenching changes," Browne said, all of which have taken place within an historic time period equal to the "blink of an eye."
"The whole infrastructure, for right or wrong, has been changed in Russiaellipseand things are still settling down. But it remains an important part of the energy supply of the world."
Browne said that Russia, as a whole, has done an "extraordinary" job of producing oil and gas on its own, without the help of international companies-a trend that he said he thinks will continue.
"There's a lot of prospects in Russia-much more oil and gas to be found." Eventually, he said, foreign companies will be a part of that.
The topic of decline of reserves in the Middle East Browne called a "mixed bag." Whereas some countries have well into 100 years' worth of reserves that are being produced slowly, he said, others are in the perpetual state of decline.
"The world is not going to run out of oil," he said, however. And if one were ever to make such a claim, Browne said to recall the prediction made in the early 1970s that the world would be out of oil by the end of the 1990s.
"We've produced all the oil to the end of the '90s, and we've ended up with more reserves at the end of the '90s than we had at the beginning of the '70s. This is a prediction that wasn't very good."
