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BP CEO to TASS: oil, new strategy, Rosneft privatization

TASS exclusive interview with Robert Dudley about the oil market and BP's relationship with Rosneft

- OPEC and Russia extended the oil cut deal until April 2018. Do you share the view that global oil stocks will stabilize by the first quarter?

I think there are different definitions of "stabilize". But I think actually, on a daily basis, the demand of oil being produced and oil consumed is got equal now.

OPEC has a goal of getting the stock level down to the average of the last five years. That’s a lower number. 

So I think we are heading in that direction.

I think there are some variables, such as demand for production that comes from Libya, Nigeria, Venezuela; there is still uncertainty around that, so there are some factors that can drive production up and down a little bit but I think we are on the right track in terms of stock levels before. 

I think they will reach towards the goal but there are certain things could make it even better or even worse.

- Does BP have to cut production at any of its projects in countries which support the cut deal?

There are some, it is naturally happening. For example, we are shareholder in Rosneft, so Rosneft is having some reductions, Azerbaijan is having some reductions, we work in some countries in the Middle East… the Emirates, yes. I have yet to see it in Iraq and there is a possibility of some reductions in Iraq; so we will be affected by it but this is not a big reduction.

Well, we had some reduction in production but I think the oil prices are a little bit higher so it offsets.

 - What scenario for the global oil market do you expect when this deal expires? What will happen to the oil price then?

I think it depends on whether the shale oil production is up, it depends on whether the OPEC and non-OPEC countries can agree, it probably depends a great deal on Saudi Arabia, the Emirates, Kuwait, and Russia.

- According to the updated BP strategy the company is planning to increase oil production to 4 mln bbl per day by 2021. What are the main drivers for these plans? 

You know BP had special circumstances with the accident in the Gulf of Mexico. And we had to sell about one third of our assets around the world so it takes now seven years to get our finances in order. And now we have serious projects and we will come back. We were 4 mln barrels per day before the accident. We went down to about 3 mln barrels per day and we are working on the way up. The big drivers are big projects around the world.

- Do you expect Rosneft's share in BP’s production to remain at the current level of around 30%?

I think Rosneft will grow as well, and we have projects around the world which are growing production. I think the number may go down to 25% or something but it will still be a very significant part of BP’s portfolio.

- BP has been interested in establishing new joint ventures with Rosneft in Russia and abroad. What ways of cooperation with Rosneft do you see? Do you plan to announce creation of new JV’s?  

We have a number of important JVs with Rosneft, one is Taas in Siberia and we have exploration joint venture in West Siberia -Yermak. And then we are discussing a variety of things now, including may be cooperation in some form on gas projects. 

I think we have a lot of ideas. In addition to projects in Russia we are talking with them about investments outside Russia. We have a lot of ideas and it always takes some time to talk about. 

May be, keep your eye on Vladivostok. But I cannot name concrete projects.

We will have to do it jointly once we decide.

- How much money are you going to invest into the Ermak joint venture? How much money has been already invested by BP and what investments do you plan this year? 

I can’t give you the exact figure of how much in this year. But it’s tens of millions this year, easily. And we have a well going drilling right now in Baikalovsky Field and we’ve got wide microseismic shooting and we will see much more activity in 2018-2019 with the seismic programs and this is a very active joint venture.

We will continue to explore and this investment will do significant exploration and if you find something, then your investments really increase.

- Are you satisfied with Rosneft's privatization results? Which way are you going to build relations with the new shareholders?

I think so. We are members of the Board. Regarding privatization, we are happy as BP shareholder in Rosneft. It seems to be going absolutely smoothly. We will have an annual meeting in Rosneft later this month. 

Well, I know them but I did not meet with them to talk about Rosneft.

Well, I am sure they will be constructive members of the board and this is what is really important for us. 

But I do not see their shareholding will lead to projects with BP directly, I mean the new shareholders.

- Do you agree with the view that oil market has recovered and is attractive for investments now? If yes, how long will this window of opportunities last?

I think it’s taking a while to have the cost structure in the industry come down because it was more than 100$ a barrel three years ago. So it is not fully there yet. But I think oil price between 50 and 60 will be good for consuming countries and producing countries and I think we are in this range now.

Some countries are a little ahead and some cost reductions are behind so it is not the same for everyone right now but it is heading in that direction.

BP will be comfortable for the next five years with the price between $50 and $60.

Well, I think it is not right to plan too optimistically. We are making assumption for five years, to be in this range. It may be lower a little bit or may be above it for short periods of time but at the moment, if you ask me about the supply and demand, I would say 50 to 60. I do not believe we will see $100 in the next five years nor do I think we will see $20.

I think price of 50 to 60 is actually healthy for the world because for consuming countries it is a fair price for energy and for producing countries it is a fair price for their product. And when it gets too much out of balance one way or another, it creates great problems in some countries. I think this will be a healthy price for the world.

Interviewed by Yulia Khazagayeva at the St. Petersburg International Economic Forum