BP has no plans to raise annual investments this decade -CEO
By Caroline Stauffer, Luc Cohen and Juliana Castilla
BUENOS AIRES (Reuters) – BP <BP.L> does not plan to increase annual investments this decade but still expects to bring nine new projects online in 2017 as it focuses on improving efficiency, Chief Executive Bob Dudley said in an interview on Wednesday.
Dudley met with government officials during an investment forum in Argentina and said BP is testing in the Vaca Muerta shale area, where U.S. rivals Exxon <XOM.N> and Chevron <CVX.N> have invested, and expects results next month.
BP said in July it continued to reduce costs and expected 2016 capital expenditures to come in below the previous target of $17 billion, and investments could drop to as low as $15 billion in 2017 if crude prices remain weak.
“I don’t think we need to and I don’t want to increase our capex for the rest of the decade. We’ve got to maintain that discipline,” Dudley said.
He said BP’s Pan American Energy LLC unit in Argentina would follow the same trend, with 2017 investment seen similar to or less than 2016, but clarified BP is not “putting the brakes on.”
The “vast majority” of spending cuts implemented after the 2010 Gulf of Mexico oil spill, one of the worst in U.S. history, were over, Dudley said.
Dudley met with Argentina’s new President Mauricio Macri and with his finance and energy ministers this week, as nearly 2,000 executives visited Buenos Aires to hear the government’s pitch at the Argentina Business & Investment Forum.
Macri won the presidency last year by promising to open Argentina’s economy to foreign investment. While companies generally speak enthusiastically about Macri’s policies, many are hesitant about Argentina’s notoriously volatile politics and economic crises.
“(The forum) is to give us the confidence to know it will be stable going forward to be able to make decisions because we are in an industry where you make investment decisions 10 years out,” Dudley said.
He reported being pleased with the “huge steps” made over the past nine months but said he would like to see infrastructure scaled up to bring down production costs as well as more labour flexibility.
BP, like rival Royal Dutch Shell <RDSa.L> but unlike Exxon and Chevron, lent its support to last year’s climate agreement in Paris that commits to limit global warming to 2 degrees Celsius.
To help achieve that objective, Dudley said BP plans to expand natural gas production to 60 percent of its portfolio by the end of the decade, up from a current 50-50 split with oil.
He added that the company was considering expanding renewable energy projects, including its biofuels operation in Brazil, despite the ongoing recession and political turmoil. The company employs 5,000 people at two large ethanol mills that Dudley described as “very successful.”
“The crisis there has not really affected us,” Dudley said, adding that Pan American Energy was studying wind energy products in Argentina’s Patagonia region.
Dudley reiterated expectations for oil prices to average around $50 a barrel in 2016, up from $44 last year, and said he expected prices “north of $50” in 2017.
Dudley came under fire from shareholders earlier this year for taking a £14.13 million ($20 million) pay deal for 2015, up substantially from 2014, even though the company cut 5,000 jobs and reported steep losses as oil prices plunged.
BP’s board initiated a review of its executive compensation practices in response, and Dudley said he expected that to yield changes.
“I’m sure the board will modify this – there’s no question about it,” Dudley said. “You can’t be too short-term in how you reward executives, and I think the board is very clear on that.”
(Reporting by Caroline Stauffer, Luc Cohen and Juliana Castilla; Editing by Meredith Mazzilli)