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BP North Sea business update
27th November 2014
UK-Norway Oil & Gas Technology Partnerships
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Tim Smith, Vice President – Communications & External Affairs
UKCS basin-wide outlook
Production Operating cost
Exploration activity Project investment
Keeping the UKCS competitive
UKCS Sanctioned
UKCS Unsanctioned
Non UKCS Projects
NPV
Bubble size proportional to total Capital
UKCS projects in BP portfolio
IRR
UKCS vs. other mature basins
• Mature North Sea basin faces challenges
• BP UKCS projects need to compete for global resources
– Materiality (NPV) and Quality (IRR)
Source: data and peer group taken from the Wood Mackenzie Exploration Service mature basins
Wood Review
• Agreed objective of Maximising Economic Recovery (MER)
from UKCS
• Need for greater resourced and more proactive regulator
• Significantly improved asset stewardship
• Far greater constructive collaboration between operators
• Six industry strategies
Industry
New
regulator:
Oil and
Gas
Authority
• Exploration strategy
• Asset stewardship strategy
• Regional development strategy
• Infrastructure strategy
• Technology strategy
• Decommissioning strategy
Fiscal review • Announced by HM Treasury in December 2013:
.
“To ensure that the UK’s tax treatment of the
UKCS continues to incentivise economic
recovery as the basin matures”.
• Consultation launched in July.
• Industry requested action on:
- Headline rate
- Single uniform capex allowance
- Cashable tax credit for exploration
- PRT
• Initial report at Autumn Statement, December.
• New tax legislation: post 2015 general election.
BP North Sea strategy
6
• Risk reduction
• Quality portfolio
• Area development
planning
• Production efficiency
• Renewal of existing
infrastructure
• New wells
• EOR
Focus Maximise the Base
• Major Projects
• Exploration
• Resource Appraise
• Relationships
Invest for the Future
High value upstream assets
Focus
• Quality portfolio following selective divestments
• Increased equity in operated assets
• Area development planning, e.g. Valhall
Renewal of existing infrastructure
• Offshore – Valhall, Andrew, Magnus & ETAP
• Onshore - SVT & FPS
High value projects
• Kinnoull
• Quad 204
• Clair Ridge
Continued exploration and appraisal
• 27th & 28th round (UKCS) and 22nd round (NCS)
• Snadd and Vorlich discoveries
• Clair appraisal wells
Key - Areas
Norway
Shetland
Central NS
Clair field – 40 yrs young
‘74 ‘77 ‘06 ‘16 ’50 ‘96 Appraisal wells & seismic Appraisal wells & seismic
Life Extension Projects
2014
1982 ETAP Magnus
Scope Increased bed space;
critical OE
improvements; integrity
management scopes;
planned maintenance.
Accommodation
refurbishment/expansion;
upgrade drilling rig, replace
BOP; fabric maintenance;
power generation; repair.
Value Aimed to deliver OE of
90%; enable rate
adding well work;
protect proven
reserves.
Return to drilling; step-
change in platform
capability; helping
production to continue into
the next decade.
Spend £0.4bn gross £0.3bn gross
Status Define Execute
Other work Projects
• Quad 204 Enhanced Oil Recovery (EOR); SVT Gas Sweetening; FPS Enhanced Gas Separate Project
(EGSP); Laggan Tormore condensate pipeline.
• Skarv Well Annuli Pressure Management (SWAPM); Valhall IP platform Crestal Gas Lift (CGL); Ula fire
and gas upgrade – P, Q & D platforms; Butch tie back to Ula.
Operations
• Marine gas oil provision (SVT, Aberdeen and possibly Hound Point)
- RFP expected March 2015.
• Marine consultancy (UK vessel assurance; marine HSE consultancy and general marine consultancy)
- RFP expected February 2015.
• UK North Sea platform supply vessel services 2015/16
- Sourcing strategy being agreed internally. Approach to market likely in 2015.
• Norwegian North Sea engineering, maintenance modifications
- RFP expected in January.
• Scatsta Airport licence holding
- Potential suppliers identified and RFP expected Q1 2015.
North Sea technology needs
- Integrity management and validation
- Lower cost well access
- EOR in mature water flood fields
- Improving plant efficiency – current industry focus
- Water management
- Decommissioning
Existing BP innovation
Seismic imaging and monitoring of reservoirs
- Seabed Arrays over Valhall and Clair
Enhanced oil recovery
- Gas injection in Ula and Magnus
- LoSal™ water flooding built into Clair Ridge
- Polymer-capabale FPSO for Quad 204
“Longer, deeper relationships with fewer suppliers”
BP Supply Chain Process Sp
en
d $
Criticality/Complexity
Supplier Engagement Matrix
- Develop long-term relationships
- Become customer of choice
- Leverage BP’s scale and spend
The way BP engages with suppliers is either:
- Direct contractual relationship
- Indirect relationship via 3rd parties
Category specialists cater for specific supply
chain sub-sectors
Planning for the long term
Questions?