BP raised its 2025 oil price assumption by $5/b to $60/b on Aug. 3 to reflect expected supply constraints, while promising a recovery in its own production following a second-quarter slump.
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In its quarterly results, the UK major spoke of an "improving" outlook and described its performance as "resilient" even as production in its upstream hydrocarbons unit fell 25% on the year to 1.25 million b/d of oil equivalent, with the oil portion falling 26% to 938,000 b/d.
The upstream reduction was offset by stable output in BP's LNG-focused gas and low-carbon energy unit and at Rosneft, in which it holds a 19.75% stake.
BP said its Q3 production should be higher due to the completion of maintenance postponed from last year -- something that also held back rivals Shell and TotalEnergies -- and new projects.
In terms of maintenance, Gulf of Mexico production should be above 300,000 boe/d in Q3 having dropped below that in Q2, barring hurricane impacts, CEO Bernard Looney told investors.
The company also expects a boost from projects already started up in Q2 -- in India, Egypt, Angola and the US Gulf of Mexico -- and another 12-13 projects are due on stream in the coming years, Looney said.
The latter includes the delayed 140,000 b/d Mad Dog Phase 2 project in the Gulf of Mexico, due on stream in early-2022, and the Thunder Horse South Expansion project due on stream later this year, Looney said, noting BP had brought on stream a satellite project at the Na Kika field in June.
Overall, this year BP expects to bring on stream projects with production capacity of 900,000 boe/d, having started up eight projects with capacity of 200,000 boe/d in the last 12 months, Looney said. Margins associated with the new capacity should be 35% higher than for the current base, he added.
BP continues to experience pandemic delays, including at a gas project in Trinidad, the Tortue LNG project in Mauritania and Senegal, and the Tangguh LNG project in Indonesia, Looney said, noting the Tortue production vessel is being built in China.
However, he said the Mad Dog Phase 2 project was in "great shape," and in US shale, the company had seven-eight rigs, with the business doing "very, very well."
He said $400 million in synergies had been achieved from BP's $10.5 billion purchase of shale assets from BHP in 2018, and noted the company had just drilled its first well in a decade in the Louisiana Haynesville gas play, expected to yield 80% returns at $3/mmBtu gas prices.
He added talks were ongoing with Italy's Eni on combining their Angolan upstream businesses in a new venture that would be a "great local efficiency play."
BP said the market was rebalancing and global oil stocks should revert to historical levels in the first half of 2022. It raised its Brent price assumption for 2025 to $60/b, while maintaining its 2030 forecast at $60/b, but lowering its 2040 forecast by $5/b to $55/b and its 2050 assumption by $5/b to $45/b.
Looney said the higher 2025 forecast was based on supply constraint rather than demand, adding that increases in electric vehicle numbers were "starting from an incredibly low base."
He cited "the discipline that OPEC+ has shown and our belief that they have shown both the capacity and the desire to maintain robust prices" and added that "over time there will be an impact of lower investment on the supply of oil and therefore that will impact price."
"Thirdly is the change of business model in the [US] Lower 48" states, he said, noting US onshore oil rig numbers were now half pre-pandemic levels.
In the downstream, BP struggled to capitalize on improved refining margins, citing maintenance, higher renewable fuel credit prices in the US, and subdued distillate demand.
Announcing a dividend rise and share buybacks, Looney stood by his energy transition strategy, envisaging a 40% drop in hydrocarbon production to 2030, and said BP's restructuring was "largely complete" with 6,000 people having left the company.
On energy transition, Looney highlighted the potential for wind projects to offer stable returns over 15-20 year intervals, and denied BP was moving too fast, saying it had rejected 50 GW of potential deals in the second quarter. "There's a massive amount of activity out there, but in no way would I say that we are ahead of the curve," Looney said.
At the same time, in hydrocarbons, "If we can find barrels that are higher margin and lower-emissions intensive than our existing portfolio, then we'll high-grade: at the end of the day what we're trying to do is create the highest-value oil and gas portfolio that we can," Looney said.