Oil major BP aims to spend $1.8 billion in Egypt next year and $1bn annually in Abu Dhabi as it looks to expand its operations in the Middle East on the back of new discoveries and licensing rounds, according to its chief executive.
BP, one of the world’s largest oil companies and the earliest explorer for oil in the Middle East through the Anglo-Persian Oil Company in Iran, reported a second-quarter profit of $2.8bn. It had $12.4bn in cash flow, which it said more than covered its organic capital expenditure.
"We've spent in the last two years $6.8bn in Egypt and it will be about $1.8bn dollars next year, Khazzan is way out there in Oman and the Adco concession each year as well is well over a $1bn of capital expenditure each year for Abu Dhabi, so it's a really important part of BP's world," Bob Dudley told The National in Abu Dhabi.
Khazzan refers to BP's huge gas development project in the Omani desert, which is expected to produce up to 1.5 billion cubic feet of gas per day by 2021. Adco is the former name for some of Abu Dhabi National Oil Company's offshore concessions.
Mr Dudley said discussions were under way to use capital in Adnoc's expanding Ruwais downstream facility, where the state producer is looking to invest $45bn with partners over the next five years.
The downstream strategy was announced in May in the presence of Mr Dudley at an investment conference in Abu Dhabi and includes doubling refining and tripling chemicals capacities, with plans to build the world’s largest integrated refinery.
"We’ve reviewed, and we’re part of the process with Ruwais," he said. "We’ve been working with Egypt and the government there and are involved in the downstream there. We do a lot there,” he said.
Mr Dudley dismissed concerns that BP had withdrawn its interests in the Middle East, particularly in Abu Dhabi, where it has been a long-term partner on the Adma-Opco concessions, now renamed Adnoc Offshore.
"We have had to step back a bit because of the BHP [acquisition] but we’ve been increasing our budgets in Oman, in Egypt,” he said.
BP concluded its purchase of global miner BHP Billiton for $10.5bn earlier this year, as it looks to increase its presence in the US shale basins.
Mr Dudley said BP was interested in Adnoc’s licensing round and gas exploration, with talks under way with Adgas, the Abu Dhabi state producer’s gas liquefaction arm.
"We’re very interested in the Adnoc concessions. We’ll be doing more in natural gas, with Adgas, I think so the commitment remains there. We’re looking at exploration in Abu Dhabi, [with] the new blocks that were announced,” said Mr Dudley.
Abu Dhabi announced last week the discovery of 15 trillion cubic feet of natural gas, which would be a 7.1 per cent addition to existing reserves and could transform the country into a net exporter for the fuel.
Mr Dudley said the company was also “growing very, very quickly” in Oman through the expansion of its Khazzan gas development and the refinery modernisation with the Kuwait Petroleum Company, as well as in Egypt.
In the macro oil environment, he observed that oil had perhaps been “a little oversold”. The major anticipated “a relatively firm market” through next year.
“It looked like it could be a shortage but stock levels came down to a reasonable level and now they’re starting to build a little bit and the world wasn’t quite sure what was going to happen with exemptions for Iran and then they were granted and the prices went down,” the chief executive said.