World energy demand will continue to grow, but new oil and natural gas discoveries ramping up across the globe will likely lead to stabilized prices and perhaps even a dip in the long term, the CEO of BP plc said last week.
John Browne spoke to the Brookings Institute in Washington, DC, to tout BP Alternative Energy, a low-carbon power business that was launched last Monday (see related story). However, the BP chief touched on a lot of energy subjects at the luncheon. The energy industry needs to plan for the future, he said, but added there remained plenty of new opportunities for exploration and production, pointing to recently discovered oil and gas deposits in the Caspian Sea, Angola, Russia and "here in the U.S. from the deepwater of the Gulf of Mexico," he added.
"Across the industry, investment which has gone in over a period of years is leading to new production. And beyond those projects which are already under way there is more to come -- not least here in the U.S the development of gas in the Rockies, where we announced a $2 billion investment plan a few weeks ago, and the major long-term development of the 35 Tcf of natural gas in Alaska, which will add a whole new source of supply to the U.S. market. That's why despite continued growth in world demand we see the prospect of prices stabilizing and perhaps even falling back to a lower level."
Browne acknowledged that "things could happen. But the increase in output from diverse sources of supply begins to restore the cushion of capacity."
Today's high oil prices "are unlikely to be sustainable and should drop to average $40/bbl in the medium term," and longer term, prices could return to a range of $20-25/bbl, he said. Browne did not comment on gas prices, which traditionally have traded at a 6:1 ratio with oil; however, he said recovery of shut in Gulf production following the 3Q hurricanes is expected to pressure prices lower, and "I wonder what will happen when it all comes on."
The CEO also updated the status of BP's deepwater semisubmersible Thunder Horse platform, originally scheduled to ramp up this year. The $1 billion platform, in which ExxonMobil Corp. holds a 25% stake, will process up to about 250,000 boe/d, but a defective ballast system caused it to begin listing after Hurricane Dennis crossed the Gulf in July (see NGI, Aug. 1). The ramp up was delayed into 2006, and production likely will begin next summer.
"Thunder Horse is fine," Browne told reporters following his speech. "The problem is, of course, the weather has been so bad we can't connect it up to the wells on the seabed...We do expect to do this next year, and we expect it to be on stream in the second half of next year, probably in the earlier part of the second half."
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