BP chief executive Bernard Looney has underlined how much money the oil and gas giant is making in areas such as the North Sea but insisted a windfall tax would not be in the UK’s interests.
The group revealed its profits hit an eight-year high of $12.8 bllion (£9.5bn) in 2021 in a success which provided further evidence of the massive boost that sectors giants have enjoyed as a result of the surge in oil and gas prices in recent months.
The rise has been fuelled by the recovery in the economy from the fallout from the pandemic, which sent BP plunging $5.7bn into the red in 2020.
BP revealed it got an average $71.12 per barrel of oil equivalent for its output in the fourth quarter of 2021, compared with $38.42/bbl in the same period of the preceding year.
The increase has left the company generating huge amounts of cash. Mr Looney noted that BP’s production costs now average less than $6/bbl.
READ MORE: Shell says North Sea windfall tax won't ease energy crisis
BP plans to make multi-billion dollar payouts to investors in coming years.
Coming days after Shell posted a 300 per cent increase in annual profits, to $19.3bn, the news from BP will likely increase calls for windfall tax to be imposed on North Sea firms.
Labour has said the proceeds of a windfall tax could be used to offset the steep increases in energy bills that millions of householders in the UK are facing.
However, Mr Looney told analysts: “If anything the UK needs more gas right now, not less, and that’s going to require more investment, not less investment and a windfall tax probably isn’t going to incentivise that investment.”
He insisted that BP will use the profits made in the North Sea to support investment in the lower carbon energy infrastructure that it is reckoned will be needed in the UK to help tackle the threat of climate change.
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“For every pound we make in the UK this decade we will invest more than two pounds into the UK this decade and the vast majority of that investment will be into the energy transition,” said Mr Looney.
The company said its plans represent an important return to growth for BP and its investment in the UK. BP has sold a range of North Sea assets and shed hundreds of jobs in the area in recent years under plans to cut costs and to focus investment on the most profitable fields. It employs around 1,000 people in its North Sea operations.
Regarding investment in the UK, Mr Looney noted that BP recently bid successfully for windfarm acreage off Scotland in the landmark ScotWind seabed leasing round. On that acreage BP plans to develop a windfarm that it reckons could generate enough power for around three million homes.
The company expects to develop significant hydrogen production and carbon capture and storage facilities and to support a rapid expansion in the number of electric vehicle charging points in the UK.
It plans to help Aberdeen become a hydrogen production hub as well as a base for the group’s global offshore renewables business.
Mr Looney said BP expects to play a similar role in other countries.
He reckons the scale and reach of the group’s global operations and the expertise developed in the oil and gas business can help it play an important role in the energy transition.
After taking charge in 2020 Mr Looney unveiled the ambition for BP to become a net zero business by 2050.
He said yesterday that having spent two years undergoing the required organisational changes BP is now focused on delivery. BP will be transformed from being an International Oil Company (IOC) into an Integrated Energy Company (IEC).
However, Mr Looney said BP expects to generate around $30 billion underlying earnings annually from what it calls its resilient hydrocarbons businesses into the 2030s. These include oil and gas production, refining and biofuels. It will focus oil and gas investment on six core areas, which include the North Sea.
READ MORE: Glasgow-born boss of BP's North Sea business highlights potential of area
BP also plans to use the profits made in oil and gas to fund payouts to investors.
Based on its forecast that the Brent crude price will average around $60/bbl in real terms, BP expects to be able to deliver share buybacks of around $4bn a year and to raise the dividend per ordinary share by around four per cent through 2025. It set a fourth quarter dividend of 5.46 cents per share, for a full year total of 21.63 cents per share.
BP shares closed down 9.65p at 399p. They have recovered strongly since falling to a multi-year low of 199.86p in October 2020.
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