Q&A with James Farnsworth

Abstract

What do you think of oil prices near U.S. $50/bbl? Is that price here to stay? If past history is any guide, it seems unlikely. There does appear to have been at least a medium-term shift in prices, largely driven by increased demand, particularly in China. Despite this, we still test our projects at U.S. $20/BOE to ensure they are robust throughout the duration of field life. How have major operators, and in particular BP, reacted to the recent surge in oil prices? Are operators putting more money into exploration, technology R&D, or both? Many of the projects that result from BP’s exploration success require several years to develop, and, because of their size, they frequently will be produced for decades. Because of this, we work very hard to maintain discipline in our exploration investment, not substantially increasing or decreasing on the basis of price but, rather, opportunities. It is becoming clear, however, that some of our competitors are significantly increasing their investments in exploration as cash flow has increased and reserves replacement has proved difficult. On technology investment, BP has chosen to invest significant amounts in R&D in some focused areas, which we refer to as Technology Leadership Areas, where we see a real need, a competitive advantage, or perceive a gap in what the service industry is providing. How much does BP spend on upstream R&D now compared with a decade ago? What accounts for that change? The spending for BP in this area is roughly similar, but it is much more focused based upon the nature of our evolving portfolio. Obviously, the continued growth of deep water is an example of this. Another is the continuing need for enhanced seismic imaging, moving from simply imaging complex structures to resolving reservoirs in complex structures.