BP’s five-year plan has revealed the next wave of its competitive projects with potential new final investment decisions (FID), a list of several offshore projects set to come online this year, and eight projects that are currently under construction set for start-up in 2018-2021.
Map of BP's next wave of competitive projects, with potential new FIDs. From BP.
The UK supermajor laid out its strategy plans aimed to deliver growth throughout its businesses over the next five years, which the company has based on a US$55/bbl oil price. The projected growth is estimated to generate $13-$14 billion of pre-tax cash flow by 2021. The projection includes the company’s 24 major projects that began production over the past five years.
“In six years we have fundamentally reshaped and built a very different BP. We are now stronger and more focused - fully competitive and fit for a fast-changing future,” says Bob Dudley, BP group chief executive.
BP told investors today (28 February) that within the next five years, several of its projects could see FIDs on the table. Those include: Atlantis Phase 3 in the deepwater Gulf of Mexico; Angelin off Trinidad and Tobago; Clair South, west of Shetland; Alligin in the UK North Sea; Vorlich in the Central North Sea; Atoll Phase 2, off Egypt; Tortue Phase 1, off Mauritania, Senegal; Zinia Phase 2, offshore Angola; and Azeri East off Azerbaijan.
In the upstream sector, growth is expected to come from a continuing series of major higher-margin project start-ups, BP says, and deliver a material improvement in its operating cash flow through 2H 2017.
Five of the projects set for start-up this year include: Juniper, offshore Trinidad and Tobago; Persephone, offshore Australia; Quad 204 in the North Sea; and Egyptian projects Zohr, and West Nile Delta Taurus/Libra. Including onshore, BP expects to have a total of seven projects come online in 2017, making it one of the largest years for commissioning of new projects in the company’s history.
“The projects coming online in 2016 and 2017 are on track to deliver 500,000 boe/d of new production capacity by the end of this year,” says BP. “The new upstream projects remain on track to deliver 800,000 boe/d of new production by 2020, as previously guided. On average, the new projects are also expected to have operating cash margins 35% higher than the average of BP’s upstream portfolio in 2015.”
A total of nine projects are currently under construction, with scheduled start-up dates anticipated for 2018-2021. Eight of those are offshore, and include: Shah Deniz 2, TANAP, and TAP, offshore Azerbaijan; Gulf of Mexico projects Constellation, and Mad Dog 2; Egyptian projects West Nile Delta Giza/Fayoum/Raven, and Atoll Phase 1; UK North Sea projects Clair Ridge, and Culzean; and Western Flank B, off Australia.
“While always maintaining our discipline on costs and capital, BP is now getting back to growth – today, over the medium term and over the very long term,” says Dudley. “Over the next five years BP expects both of its major operating segments to deliver material growth in operating cash flows while the Group maintains its existing financial frame. In the upstream, growth is expected to come from a continuing series of major higher-margin project start-ups.”
BP says it intends to maintain its existing financial frame throughout the five years to 2021, with organic capital expenditure kept within a range of $15-17 billion a year and the target band for gearing remaining at 20-30%. The company says it is confident that upstream production will grow from 2016 by an average of 5% a year out to 2021.