London-based BP plc’s oil and gas output is expected to grow at least 5% globally through 2008, and the company expects to grow its natural gas sales volumes 3-5% a year, the CEO said Monday. Sir John Browne added that because of the expected strong organic growth in the next four years, excess cash will be given to shareholders.

In a strategy meeting with analysts, Browne and his executive team laid out the company’s focus over the next few years. Most of the oil and gas production will come from international prospects, including its newest operating area in Russia. BP struck a deal with Russia’s TNK to explore for oil and gas reserves, which, when included in its oil and gas outlook, would add at least 2% a year to production goals through 2008. Oil and gas output from Russian prospects alone is expected to rise nearly 830,000 boe in 1Q2004 from 720,000 boe in 4Q2003.

Excluding Russia, oil and gas output is forecast to be about 3.17 MMboe/d in the first quarter, which would be slightly less than the final quarter of last year. The drop in first quarter output was blamed on a strike in Trinidad and losses in Alaska after a field there was shut down.

“We are going to build production with steadily improving cash returns,” said Browne. “We are investing in the largest, lowest cost basins while we manage the decline of existing production assets.” Finding and development costs are expected to range between $4-5/boe through 2006, while capital expenditures for its exploration and production are expected to be between $12-12.5 billion a year through 2006.

For its entire gas group, BP is forecasting a 20% increase annually for the next few years. Already the North American wholesale natural gas volume leader, the company also expects its gas liquids sales volume will grow about 5% a year as it commissions new plants and increases its share of target market segments. Liquefied natural gas (LNG) plans also are “accelerating,” Browne said. By focusing on key markets, BP has a 35 Bcf/d in market potential, he said.

Gas marketing margins are expected to be higher than 4Q2003 in North America and in the LNG business, which he said was “in line with higher seasonal margins seen over the past few years,” while NGL margins are expected to be flat sequentially from last quarter. Browne added that the gas and power segment also was developing customers for its equity gas business.

Browne also announced that the company’s share buy-back program has won strong investor support. The oil major began its buyback program last year, and unlike most majors, which maintain dividend payments and focus on capital investment, an oil price of $20/bbl would allow BP to meet its capital requirements and pay a progressive dividend policy. All free cash generated by higher commodity prices would be returned to investors.

“There appears, at present, to be overwhelmingly more chance of the oil price being above $20 a barrel for the next few years, than not,” Browne said. Now, BP is “beginning to be able to deliver a level of return — consistently and sustainably year by year — which will improve on anything we’ve seen so far.”

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