LONDON — BP PLC pledged Tuesday to boost its annual pretax profit by more than $3 billion over the next two to three years, with plans for scores of new projects to counter declining output from existing oil and gas fields.
The company said it expects to lift oil and gas production by an average of between 1 and 2 percent over the next five years and that it was increasingly confident of further growth to the end of the decade.
Chief Executive Tony Hayward said BP needed to work harder to utilize its assets in the face of depressed global refining margins. He acknowledged that the company still has "some catching up to do" relative to the performance of its peers.
"Whichever way you look at it, there are significant opportunities for improvement and in every case firm plans are in place to close these gaps," Hayward told analysts at the company's annual strategy update.
BP last month reported full-year replacement cost profit of $14 billion for 2009, a 45 percent decline from 2008. Replacement cost profit is the measure most closely watched by analysts. It excludes changes in the value of crude inventories and measures the amount it would cost to replace assets at current prices.
Hayward said the company's medium-term growth would focus on three areas: deep-water production, global gas, including unconventional gas, and managing some of the world's giant oilfields.
BP will make final investment decisions on 24 new major projects over the next two years. It hopes to start up 42 new major projects between 2010 and 2015 as existing fields decline.
The projects, ranging from Russia to the North Sea, will contribute one million barrels of oil a day by 2015 or around a quarter of BP's total production — more than offsetting falling output from maturing fields. The company produced 4 million barrels of oil equivalent per day in 2009, an increase of 4 percent from 2008.
Hayward said that he expects annual capital investment to be "gently rising" from a base of $20 billion this year. He added that BP was more likely to buy oil fields than companies, and that he would be surprised if it found good value corporate acquisitions.
BP plans a new unit to manage development of all major new projects. It will be based at the headquarters of its exploration and production business in Houston.
Hayward also indicated that BP would extend the cost-cutting program he instituted after taking the top job in late 2007. The program has saved BP some $4 billion and drove the company's finding and development costs down to a five-year low of $12 per barrel in 2009.
The company's decision to put the pursuit of global gas production on its priority list reflects a push by major oil companies to explore and produce "unconventional" oil.
Gas has a smaller share of production for BP than some of its competitors — about 40 per cent, compared to almost 50 per cent for Royal Dutch Shell, Europe's second largest oil company after London-based BP.
Hayward has stressed that shale gas will be a game-changer in the North American market where BP, Exxon Mobil and France's Total have all committed to investing billions of dollars in reserves.
However, while technological advances have made shale gas commercially viable, there are also concerns about environmental damage. Critics point out that the chemicals used in hydraulic fracturing — breaking up shale rock with fluids under high pressure to release the gas — can enter the water supply.