BP plc has made a few select final investment decisions this year and it's planning more in 2017, but it's only going to be the cream of the crop as the industry gets back to work, CEO Bob Dudley said Tuesday. And the turn to natural gas will continue.

Speaking at the 37th Oil & Money Conference in London, Dudley said investments are returning, but "it's only going to be the very best." Prices, of course, will make a big difference. BP expects 2017 oil prices to average $50-60/bbl, versus $28-53 this year. Surging supplies, especially from shale prospects in North America, will continue to pressure pricing, while demand stagnates.

"I don't think demand will fall off a cliff," the BP chief said. "The issue is one of oversupply. Our industry has been impacted by our own success, particularly in the shape of the shale revolution. But long-term demand will keep growing -- up by about a third by 2035 on the most likely path...But it is growth that comes at a time when we are back to a world of volatile and often low oil and gas prices."

The industry, said Dudley, is faced with three big "challenges" going forward: competitiveness, carbon and choice.

"The challenge of competitiveness arises because we live in an age of plenty, primarily driven by shale. Demand may be strong, but supply is even stronger, with half a century's worth of oil and gas in country reserves alone. That is what has led to sustained lower prices and a new and necessary emphasis on competitiveness."

The industry is undergoing profound change, he said, "change for the better." When oil was priced at $100/bbl, costs drifted higher and nearly all projects looked attractive for investment.

Today, the oil and gas industry has to focus on the "highest quality projects and develop them with great capital discipline. Every dollar we have is scarce and we must invest it wisely and carefully. The world is now hyper-competitive for capital. This is driving a lot of innovation and reform in our industry. And there will be a good future for the most competitive businesses. Those will be businesses that stand the test of time and are resilient to price cycles. They will be businesses that can adapt to the relentless increase in clock speed, that are agile, and take opportunities to improve and strengthen safety and reliability."

In practical terms, he said, the industry has to standardize what it does -- and hug innovation as close as possible.

"This tough economic environment is coming at the same time as extraordinary technological change -- a new Industrial Revolution -- and we must embrace it," Dudley said. "We have spent a century devising and using our own industry's oil and gas technologies, but now we can harness a wave of new technologies that apply across sectors -- digital technology, big data, artificial intelligence, robotics, virtual reality and materials science. Our industry is playing catch-up, but catching up fast."

Energy companies also have a major role to play in the transition to a low carbon future, Dudley told the audience.

BP is rumored to be ready to step up its renewables business. It remains one of the largest wind producers in the United States.

Reducing emissions "is bigger than any single business or any single sector," Dudley said. "It requires action on many fronts, and by many parties. Governments have a major part to play, and it's very good to see last year's Paris Agreement will soon formally enter into force" (see Daily GPI, Dec. 14, 2015).

More "widespread carbon pricing" should be introduced to incentivize low-carbon energy and efficiency. And while natural gas burns about half the carbon of coal, "to fully reap the benefits, it's important to reduce methane emissions" from production. "Every step we take to reduce methane emissions increases the advantages of natural gas over coal and helps to realize its potential to limit carbon emissions at scale while helping to meet demand in an affordable way."

Progress can be faster by working collaboratively, according to Dudley. BP participates in the Oil and Gas Methane Partnership, which also includes Statoil ASA and Total SA.

"For the next few decades, oil and gas can remain the dominant form of energy powering the global expansion, and we'll see less coal and more gas," he said. "Last year gas use grew 1.7% while coal declined by 1.8% -- the largest fall on record...We're about 50% natural gas right now and heading toward 60% by the end of the decade as new projects come onstream."

Dudley offered some words about not what the industry does but rather how it does it.

"I think we face two particular issues -- an issue of trust, and one of talent. Trust is not just an issue for oil and gas leaders. There is a lack of trust across society, in corporations, but also in governments, and big institutions..."

He acknowledged that BP has had a hard road in rebuilding the public's trust since the Macondo well blowout in 2010.

"The lesson for us has been that you can rebuild trust, but it takes time. Each of us in industry can help with our industries if we behave with integrity, if we listen, if we treat people with respect and if we act as good ambassadors for our companies. If people in business and public life behave in that way, then gradually we can establish a new contract between customer and supplier, between shareholder and institution, between voter and government -- and, very importantly, between our companies and those we hope to recruit."