BP plans to boost its proved reserves with a slew of projects as it seeks to increase output, writes Jon Mainwaring
BP's strategic pivot in February saw it dispense with its plan to limit upstream production to 2mn b/d of oil equivalent (boe/d) by 2030. Instead, the UK major now sees its oil and gas output at about 2.3mn-2.5mn boe/d at the end of the decade. The company's 2024 production came in just below that range, so to make up for field declines and grow its output further, BP's upstream business is now focusing on project execution.
BP does not lack the resources it will need, its upstream boss Gordon Birrell told Argus last month. "We've got tremendous opportunities in our hopper. We've got 31bn bl discovered… roughly 16bn is what we call commercial. So we've plenty of resources in the hopper, and we're reactivating our exploration portfolio as well," he says.
As far as proved reserves go, BP's latest annual report shows these amounted to about 3.7bn bl of liquids and 14.8 trillion ft³ (418bn m³) of gas at the end of 2024, which translates to about 8.7 and 5.8 years' worth of production, respectively. In this respect, BP lags its European peers (see charts), but Birrell is "not overly concerned", pointing out the reserves replacement ratio (RRR) "is really a function of how fast you bring forward your final investment decisions [FIDs]".
BP's RRR has averaged about 50pc over the past two years, but Birrell expects it to be 100pc by 2027 and remain at 100pc even as its production grows.
"Before we did the strategy reset, we had a strategy to decline in production," Birrell says. "So we had no need really to bring an aggressive train of major projects forward for FIDs, so the [reserves-to-production] fell. Now in our reset strategy, we're going to bring on 10 major projects by 2027, another 7-8 by 2030, and another 7-8 joint venture projects. So we've got a lot of projects coming, either to come into production or to take the FIDs on over the next couple of years, and that will boost our reserves replacement ratio."
The key to BP boosting proved reserves and maintaining output above current levels will be two core regions — the US and Mena.
In the US, BP plans to increase its oil and gas production to 1mn boe/d by the end of the decade from about 670,000 boe/d in 2024. The bulk of the increase will come from its Lower 48 business BPX, which produced about 430,000 boe/d last year, but which BP aims to grow into a 650,000 boe/d business by 2030. "There's a huge resource base," Birrell says, pointing out that the Lower 48 assets BPX now owns after BP's $10.5bn deal with Australia's BHP in 2018 "turned out to be way better than we anticipated in terms of the quality of the rock".
High-pressure business
The remainder of BP's US growth this decade is coming from a succession of projects in the deepwater US Gulf of Mexico. "We've got, of course, the big headline stuff in the Paleogene — 10bn bl of resource discovered and we're doing an appraisal programme late this year or early next year that could add another 50pc to that."
Success in the high-pressure Paleogene layer has already led to last year's sanctioning of the Kaskida project — a development that will have the capacity to produce 80,000 b/d from six wells from 2029. Further Paleogene projects could be given the green light later this year, when BP is set to make decisions on whether to develop its Tiber and Guadalupe discoveries.
Birrell also name-checks the Mad Dog Argos Southwest Extension project that will be tied back to its Mad Dog platform and is scheduled to come on stream later in the year, and he notes that the company continues to explore in the US Gulf for Miocene and Paleogene resources. "We've just had a Miocene discovery we announced far south in the Green Canyon area [and] we're doing an appraisal well in the Paleogene," he says. But he cautions that BP is "not in a huge hurry to go and do more Paleogene exploration" given that it already has 10bn bl discovered in that formation.
One item that BP's investors have expressed some concern about is US president Donald Trump's imposition of tariffs and how they might affect BP's business in the country. But chief executive Murray Auchincloss sought to reassure about the effect of tariffs on the company, both at its annual general meeting on 17 April and during its first-quarter earnings presentation this week.
"If you think about our American business, we import product from Canada to process in our refineries. That's now been exempted under the US-Mexico-Canada trade agreement," Auchincloss told analysts on 29 April. "The aluminium and steel tariffs, we're not seeing any impact in our Lower 48 business because we took a choice 18 months ago to source all that steel domestically. So we don't see much of an impact. And in the Gulf of America… there [are] some speciality steels that we import for drilling and casing, but it's very, very small and it's not going to have a material impact on the business."
In the Mena region, BP is working to flatten field declines in Egypt, where it produced 175,000 boe/d (mainly gas) last year. In the West Nile Delta area, Birrell notes that two exploration successes this year — gas discoveries at El Fayoum and El King — can be fast-tracked to development owing to suitable infrastructure close by. BP is also bringing to production the infill wells it drilled in the second development phase of the Raven field. "The first well is on line right now. So that's flattening decline," he says. The company is also co-invested with Adnoc in assets in the East Nile Delta.
In the UAE, BP holds a 10pc interest in the Abu Dhabi Onshore concession, where Birrell notes investments are being made as part of Abu Dhabi's plan to increase its crude production capacity to 5mn b/d by 2027, from 4.85mn b/d last year. BP also ought to net more barrels from its participation in the concession in the near term thanks to the current easing of Opec+ production ceilings.
In Oman, the BP-operated tight gas Block 61 has "been a tremendous success", Birrell says, pointing out that the major's deployment of technology used by BPX has enabled it to "unlock that reservoir massively". BP is currently looking to develop another tranche of gas there, he adds.
Deal of the decade
But it is Iraq that holds the most promise for BP in the region after the company struck a production sharing agreement-type deal to redevelop the Kirkuk fields. At BP's strategy day in February, Auchincloss said that in a decade's time the agreement with the Iraqi government to use the company's big field know-how to boost production at Kirkuk will be seen as "one of the most important transactions BP has done in 20 years".
Although BP for now is being coy about potential production figures for the Kirkuk fields — which today account for almost all of state-owned North Oil Company's 300,000 b/d — previous talks the company held with Iraq between 2013 and 2019 envisaged a production boost to 750,000 b/d from the 500,000 b/d the fields were producing at the time.
Whatever the numbers BP's executives might have in mind, Birrell reckons that the company "can move very quickly — just as we did in Rumaila when we went in there back in the early days to boost production using our reservoir management skills, our digital skills, the data analytics that we've got and our deep reservoir engineering knowledge".
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