BP forecasts $14bn upstream profits by 2021 with oil at $55-barrel, while BP Alternative Energy looks to wind and biofuels in longer term

With capital investment kept steady and increasingly efficient operations and modernisation driving costs lower global oil giant BP is forecasting that its Upstream oil operations will generate around $14 billion of pre-tax free cash flow by 2021 at oil prices around $55 a barrel.

Its new upstream projects remain on track to deliver 800,000 boe/d of new production by 2020. On average, the new projects are also expected to have operating cash margins 35% higher than the average of BP’s Upstream portfolio in 2015.

Chief Executive Bob Dudley has set out plans to 2021 to demonstrate how BP plans to deliver growth over the next five years.

Brian Gilvary, BP chief financial officer, added: “Last year we delivered our targeted $7 billion reduction in cash costs a year early, and capital spending was $8.6 billion lower than its peak in 2013 – without damaging our growth pipeline.

“We expect this combination of continued cost discipline with the growing cash flow from our core businesses – and the recent portfolio additions – will steadily drive down the cash balance point of the business.

“Over the next five years we expect this to fall to around $35-40 a barrel for the group overall.”

Oil industry and OPEC country sources say Saudi Arabia wants crude prices to rise to around $60-barrel this year, a level Riyadh sees as encouraging investments but not spurring a fresh surge in US shale production.

Beyond the next five years, BP strategy also aims to ensure that the company continues to meet the energy demands of a changing world.

BP’s Alternative Energy business – comprising US Wind and Brazilian biofuels – is already the largest operated renewables business among oil and gas peer companies and BP is further improving efficiency to deliver incremental growth.

In Wind, BP is upgrading some of its existing turbines and, in biofuels, has de-bottlenecked manufacturing sites to increase production.

BP is also exploring new business models and technologies which may potentially develop into options for material businesses in the future, with investment into venturing in areas such as low-carbon, digital and mobility to grow options for the future.

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