BP expects stable 2022 production despite Russia exit as Q1 growth supports

BP expects to maintain "broadly flat" levels of oil and gas production in 2022, supported by recent project startups, and plans to maintain its increased capital spending plans for 2022, despite the loss of its Russian assets, it said May 3.

In a results statement, BP reported a 1.5% year-on-year increase in its upstream production in the first quarter 2022, excluding the portion from Russia, to 2.25 million b/d of oil equivalent.

Production was boosted, it said, by new projects that came onstream in 2021 particularly in its 'gas & low carbon' unit, although the company also started up oil-focused projects during the year and into 2022. Gas projects started up in 2021 included projects offshore India, Egypt and Trinidad & Tobago.

Warning of ongoing volatility, BP said it expected a slight increase in production this year from its conventional 'oil production & operations' business, with the 'gas & low carbon' business maintaining "broadly flat" production. However, it said it anticipated a quarter-on-quarter decrease in underlying production in Q2, with the reduction primarily in the 'gas & low carbon' unit, due to maintenance and base decline. Recent oil-focused projects brought on stream by the company include Thunder Horse South Expansion Phase 2 in 2021 and the Herschel Expansion project in February 2022, both in the US Gulf of Mexico.

It also said it was sticking to its plans for $14 billion-$15 billion of capital expenditure in 2022 announced before the invasion of Ukraine and the company's decision to exit its Russian assets, for which it booked a pre-tax charge in its accounts of $25.5 billion.

It identified several sources of volatility ahead, including, in addition to the invasion of Ukraine, China's COVID-19 measures and uncertainty over OPEC+ supply.

BP "expects an ongoing elevated risk of oil price volatility. This reflects uncertainties around the level of disruption to Russian supply, the capacity for increased OPEC+ supply, the ongoing impact of COVID-19 on demand and the impact of the conflict in Ukraine on economic growth," it said, adding it "expects the short-term outlook for gas prices to remain heavily dependent on Russian pipeline flows to Europe."

BP still reported some Russian production derived mainly from its stake in Rosneft from before the Ukraine invasion and its decision to exit its Russian assets. Averaged over the quarter this amounted to 584,000 b/d of oil production and total hydrocarbon volumes of 750,000 b/d of oil equivalent.

"Our decision in February to exit our shareholding in Rosneft resulted in the material non-cash charges and headline loss we reported today. But it has not changed our strategy, our financial frame, or our expectations for shareholder distributions," CEO Bernard Looney said.

In a separate statement reflecting political pressures on upstream producers in the UK, BP said it planned to invest up to GBP18 billion ($22.6 billion) in the UK's energy system up to 2030, including in traditional oil and gas activities, carbon capture & storage, hydrogen infrastructure and low-carbon solutions for consumers such as electric vehicle charging.

"We're backing Britain. It's been our home for over 110 years, and we've been investing in North Sea oil and gas for more than 50 years," Looney said. "We're fully committed to the UK's energy transition — providing reliable home-grown energy and at the same time focusing on the drive to net-zero."