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BP hints that it may offload green business

BP hints that it may offload green business

BP PLC Chief Executive Tony Hayward hinted on Wednesday that it may offload part or all of its green business unit as he updated analysts on the oil major's turnaround strategy.
Giving his first annual presentation to analysts since taking over from former CEO John Browne last May, Hayward also said that BP could be producing some 4.3 million barrels of oil equivalent a day by 2012.
Hayward said that BP intended to grow its Alternative Energy business "predominantly for its equity value."
The green unit, which was much prized by Browne, is worth between US$5 billion (euro3.3 billion) and US$7 billion (euro4.7 billion), based on market valuations for similar companies, Hayward said.
"As we go forward we will be looking at how best we can realize that growing value for our shareholders," he said in comments provided to the London Stock Exchange from the analysts' briefing.
Selling all or part of the business would drop a key plank of Browne's strategy, the rebranding of the former British Petroleum under the "Beyond Petroleum" name.
Advertisements have focused heavily on the company's green investments, but environmental campaigners have long argued that it was little more than a marketing gimmick.
Hayward said the company was making good progress with a restructuring plan that is aimed at improving BP's dismal operational performance after a turbulent year in which it was fined millions of pounds for environmental crimes and fraud.
BP has already begun cost-cutting and restructuring, including shedding 5,000 jobs, as it seeks to close the gap with rivals like Royal Dutch Shell PLC and Exxon Mobil Inc. caused by poor performance in BP's downstream business.
Iain Conn, chief executive of refining and marketing, estimated that gap at US$3.5 billion (euro2.3 billion) to US$4 billion (euro2.7 billion) a year, assuming an average refining margin of US$7.50 a barrel.
Conn said plans were in place to reduce that by nearly half by the end of 2009, chiefly from restoring and upgrading BP's refineries, including Texas City, where an explosion killed 15 workers in 2005. Conn said the remaining distillation capacity at Texas City would be back on stream in the coming weeks and most of the margin capability in place in the second quarter.
Hayward added that the company could sustain production of at least 4 million barrels a day until 2020, even with no new discoveries or access to new opportunities, assuming a crude oil price of around US$60.
"However, bearing in mind a rise in exploration spend to nearly US$1 billion (euro660 million) this year together with significant additions of fresh acreage in established areas such as the deepwater Gulf of Mexico and a continuing drive to access new provinces around the world, we expect to do better than this," he said.
The company said it replaced its annual production by 112 per cent in 2007, taking its proved reserves of oil and gas to 17.8 billion barrels. It also added some 2.4 billion new barrels to its non-proved resource base which now stands at a further 42.1 billion barrels of oil equivalent.
Exploration & Production chief executive Andy Inglis estimated upstream spending this year at US$15 billion (euro10 billion), or US$17.5 billion (euro11.6 billion) including BP's share of spending by TNK-BP and Pan American.
Inglis said BP expected to bring more than 25 new projects on stream between 2007 and 2009.


Updated : 2021-03-08 21:18 GMT+08:00