London — BP's chief executive Bob Dudley warned on Wednesday about the risks of high oil prices hurting the global economy and said the major was planning its business around crude trading in a range of $60-$65/b over the coming decade.
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Speaking at the Oil & Money conference in London, Dudley said prices currently above $84/b for Brent were "off the fairway" and even posed a danger to the world economy.
Dudley added that industry cost structures had fallen systematically since the beginning of the decade but also stressed that under-investment across the sector remained a concern for the entire industry, which he said had witnessed $2 trillion wiped off its market value in the six months after the 2014 crash.
"Are we now off to the races again? We're spending. [But] my sense of the industry [is] it learnt such a painful lesson: capital discipline is really important. Our valuation as an industry is still low because people worry we're off to the races and we're going to be spending too much money," he said.
Global spending on oil and gas projects peaked in 2014 at $900 billion and is expected to reach just $510 billion this year despite crude's rebound above $80/b.
"We're very disciplined in our company, really disciplined with our capital spending and we will continue to be, and not planning on an $80 future. We're planning on a cycle of $60-$65. It's a bit up from the $55 we said last year," said Dudley.
The conservative price outlook presented by Dudley is ajar with the consensus of a growing number of international banks, which have in recent weeks highlighted the risks of crude returning to $100/b levels.
"I think we're a bit off the fairway on an oil price today that's good for the world," said Dudley.
The head of the UK's second-largest oil and gas company by market value also addressed concerns over climate change. Dudley described the construction of coal-fired power plants as the "epicenter" of the problem.
Carbon capture and storage would be key to reducing emissions from oil and gas, Dudley said. He added, BP is interested in projects to re-inject carbon into formations beneath the North Sea, an area he said "has some promise.". He also said the US now has major incentives for carbon capture.
"As far as the risks from investment decisions go, I believe the more serious systemic risk comes from under-investment in oil and gas exploration and production, not over-investment," Dudley said.
"Renewables are growing at a remarkable rate...with optimistic projections, including our own, suggesting they could supply around a third of the energy mix by around 2040. But we still need to meet the remaining two-thirds of demand, and oil and gas have a crucial role to play. They can do that and be consistent with the Paris goals so long as Carbon Capture Usage and Storage is deployed widely, especially in the power sector," he said.
Dudley reiterated calls for collaboration across sectors, "where energy providers, investors, governments, NGOs and everyday citizens are all working together to advance a low carbon future."
SANCTIONS ON ROSNEFT, LUKOIL, GAZPROM WOULD SHUT DOWN EUROPE'S ENERGY SYSTEMS: DUDLEY
Dudley warned Wednesday that any escalation of sanctions to target Russia's major oil and gas companies would shut down Europe's energy systems, and stressed BP took great care to comply with sanctions in its own interactions with Rosneft.
Speaking at the Oil & Money conference in London, Dudley was asked about any replication of sanctions of the type imposed on metals giant Rusal, in the wake of growing criticism of Moscow by the US and its allies.
"If sanctions were put on Rosneft or Lukoil or Gazprom, like what happened to Rusal, you would virtually shut down the energy systems of Europe," Dudley said.
Dudley noted he is on the board of Rosneft, reflecting BP's stake in the Russian state-controlled oil giant, and stressed BP abided by international sanctions on Russia, and that he discussed the two companies' relationship with US government officials.
Rosneft CEO Igor Sechin is the target of US sanctions in a personal capacity. But sanctions on Russia's oil and gas industry as a whole are generally seen as not having reduced production volumes for the time being.
Dudley said: "I work really carefully to make sure our work and what I do is always within the bounds of the sanctions. I'm very transparent about it, talk to US government officials about it. It's a financial investment."
--Nick Coleman, email@example.com
--Edited by Maurice Geller, firstname.lastname@example.org