BP MARKS PROGRESS TOWARD STRATEGIC TARGETS

BP Exploration has marked significant progress toward its key strategic targets the past 5 years.

And the company cites recent discoveries that will add greatly to its targeted production growth of at least 2%/year to 2000 and beyond. That includes a projected 6% hike in gas production that will help take the company's worldwide production to 1.7-1.8 million bbl of oil equivalent per day (boed) by 2005 and bolster revenues by $1 billion/year by 1996.

British Petroleum Co. plc Managing Director John Browne detailed the upstream unit's strategic progress in a talk to analysts in London, where he also disclosed BP's major natural gas discoveries off Viet Nam (see related story, p. 40).

Tracking BP Exploration's progress since 1989, Browne said the company has:

Focused exploration down from more than 30 countries to 10, cutting exploration budgets by one third to a little more than $600 million/year but sharply increasing the share spent in new areas.
Cut lifting costs by more than 20%, slashed finding costs to $2/bbl from almost $5/bbl, and axed finding and development costs to $4-5/bbl from more than $10/bbl.
Reined capital spending to about $2.7 billion in 1994 from $4 billion in 1990.
Added 1.2 billion bbl of oil and 2.7 tcf of gas to reserves through exploration and 880 million bbl of oil equivalent (BOE) from revisions to existing fields and more than replaced production the last 2 years.
Improved profitability per barrel to help maintain after tax profits despite a drop of more than $3/bbl in oil prices and loss of about 250,000 b/d of production through asset sales.

BP Exploration has established a range of options, secure at an oil price of $14/bbl, Browne noted, that will give the company flexibility to make investment choices and pace activity and development accordingly.

PRODUCTION GROWTH

BP's targeted production growth will come partly from established provinces of Alaska and the North Sea.

Those two areas, where improved recovery rates and a string of new fields, including small satellites made economic by nearness of infrastructure, will combine to keep production at current levels of more than 1 million b/d for at least the next 15 years.

Included in that outlook is production from other existing sources such as Australia and Abu Dhabi.

In Alaska, despite the continuing decline in supergiant Prudhoe Bay oil field, BP's overall production of 580,000 b/d will slip by an average of only about 3%/year.

That's because of steady production from Endicott and Kuparuk River oil fields and increasing flow from Point McIntyre, Niakuk, and Milne Point. Production from Milne Point, undergoing further development work, is slated to rise to 50,000 b/d by 1996 from the current 20,000 b/d.

In the North Sea, where BP produces 500,000 b/d of oil and 900 MMcfd of gas, production is projected to increase by 2%/year the next 3 years as Harding and Andrew fields go on stream.

BP also expects to start production by yearend 1998 from the North Sea's ETAP complex a group of eight small fields tied to a single platform. BP holds a 50% in ETAP, which holds combined reserves of 400 million bbl of oil and 1.2 tcf of gas. Potential productive capacity is pegged at 185,000 b/d of oil and 450 MMcfd of gas.

Elsewhere in the North Sea, Magnus field is proving much more prolific than BP previously thought. About 350 million bbl has been added to the original reserves estimate of 450 million bbl, and BP estimates it could add another 100 million bbl of reserves from further drilling and satellite developments during the next few years. That would keep production at peak of 143,000 b/d until well into 1996.

Off Norway, Browne disclosed a well on Block 34/11 found a significant accumulation of natural gas and is drilling ahead to a deeper target. BP holds a 15% interest in the license, awarded in Norway's 14th licensing round.

NEW AREAS

BP expects its new exploration regions, including West of Shetland, Colombia, Gulf of Mexico, and Viet Nam, to provide a significant portion of its worldwide production in 5 years, all from fields discovered or under development.

Regarding progress in other new and emerging areas:

BP and partners in Caspian Sea work signed an agreement on terms for development of fields along the Apsheron trend off Baku, Azerbaijan. The Azeri fields contain at least 3 billion bbl of oil, and first oil is possible by mid-1997. BP holds a 17% interest in the project.
Reserves in Colombia's Cusiana field were confirmed at 1.5 billion bbl. In associated Cupiagua field, appraisal drilling has established 500 million bbl of reserves, and further drilling is under way to assess full extent of reserves.

First phase development will result in 90,000 b/d by yearend and 185,000 b/d by yearend 1995. Partners have reached initial agreement on second phase development, which would hike oil and natural gas liquids production to 500,000 b/d by 1998. That calls for a new pipeline to Covenas terminal, for which engineering is well under way.

Total first and second phase project costs, including the pipeline, are estimated at $6 billion, of which BP's share would be about $1 billion.

BP also is studying ways to move gas to market from its bit Volcanera gas/condensate field discovery in Colombia's Piedemonte area (OGJ, Sept. 5, p. 44). It estimates gross production, including gas for reinjection into Cusiana, could reach 800 MMcfd by 2005. BP plans to drill one or two wells/year on its Piedemonte acreage and soon will begin seismic surveys on acreage it acquired immediately west of Piedemonte.
In the Gulf of Mexico, where it has interests in 323 mainly deepwater blocks, BP plans four wildcats this year and expects to maintain that pace in the foreseeable future. It has booked a total 300 million BOE of oil and gas reserves and identified another 250 million BOE still to be booked. First oil from Mars field is slated for yearend 1996, with first phase production rising to 100,000 b/d and 100 MMcfd at a development cost of less than $3/bbl. A second phase could extend that level through 2010.
West of Shetland, BP plans five development wells in Foinaven field prior to start-up in late 1995 or early 1996 at a rate of 75,000 b/d. It also is preparing an exploration/appraisal program for Schiehallion field, the northern Foinaven area, and adjacent blocks. It pegs finding and development costs for Foinaven at $4-5/bbl, possibly lower in a second phase.
In Venezuela, BP's net share of production from reactivating two fields, Pedernales and Quiriquire, is expected to rise to about 20,000 b/d by 1997. The project comes under Petroleos de Venezuela SA's marginal fields program.

GAS PROSPECTS

Browne also said BP plans to boost its share of the world gas market and is steadily building its gas prospect portfolio.

In the U.K., BP expects to take a 20% interest in the Interconnector pipeline to Zeebrugge, Belgium, which is scheduled to be commissioned by 1996 with capacity of 1-1.5 bcfd.

BP also is negotiating with Algerian state petroleum company Sonatrach to appraise and develop gas in Southwest Algeria's District 3 and transport the gas via pipeline to markets in southern Europe.

In addition, BP has significant undeveloped gas reserves in Papua New Guinea that offer potential for a liquefied natural gas export project "if we can get the costs right," Browne said.