BP plc’s CEO told shareholders and analysts Thursday that the story of 2003 was about maintaining the strength of the assets, but going forward, the oil and gas giant has set its course toward maintaining its asset and customer advantage in oil and gas markets around the world.
Speaking at the annual meeting in London, Lord John Browne said the oil major’s strategy “is proving to be very effective. It is delivering results, and positioning us well for sustainable growth.” Overall, BP’s strategy, laid out over the past several years, will help it manage “through the inevitable volatility of energy markets and the capacity to deliver progressively improving returns.”
Browne said that despite the weak global economy, the Iraq war, terrorism issues and “increasingly complex regulations, particularly coming from the United States…BP rose convincingly to all these challenges and achieved one of the strongest performances in our history.” Overall, BP replaced more than 120% of the oil and gas produced.
“We made new discoveries in Egypt, Angola and the deepwater of the Gulf of Mexico. We produced around 3.6 MMboe/d of oil and gas, in line with our expectations. We continued to expand our presence in the important liquefied natural gas (LNG) market by producing over 40% more LNG from our equity gas than in 2002. Globally, our oil products and convenience sales grew significantly and profitably. And in North America, we were the leading wholesale gas marketer.”
Going forward, Browne said BP’s production is expected to “grow quite strongly to the end of the decade. Production in some of the mature areas such as the North Sea will inevitably decline, but the developments in our five new profit centers, including Trinidad, Angola, the Caspian and the deepwater of the Gulf of Mexico are all on schedule, with new fields due on stream in 2004 and 2005.”
However, BP Chairman Peter Sutherland did not gloss over future obstacles.
“The challenge for the group in the coming years is to exploit the advantages open to it from this excellent asset portfolio, and to make the most of the strategic positions that it has established in many markets,” Sutherland said. He cited the TNK-BP joint venture announced in Russia last year as a “prime example of the type of transaction in which the group must be involved in the future if it is to continue to gain first mover advantage.” The joint venture gave BP a 50% stake in Russia’s third largest oil and gas company.
The chairman also cited initiatives “on both sides of the Atlantic” that will influence the way BP and its peers are governed in the future, including the Sarbanes-Oxley Act in the United States and the Combined Code in the United Kingdom. An important challenge going forward, he said, will be the “considerable focus” in which companies report their oil and gas reserves.
“This is a complex topic,” said Sutherland, but following a review by BP’s Audit Committee, “we are satisfied that there are appropriate processes in place within the group to estimate the proved reserves that we report to you, our shareholders.” To ensure BP’s management maintains its leading edge, Sutherland also told shareholders that if they approve, the BP board will be up for re-election every year.
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