Dudley: ‘Oil players need state incentives’


Some governments needs to wake up to the fact that they need to adequately incentivise capital-constrained oil companies or run the risk of seeing their resource bases laying untapped to their own detriment, BP chief executive Bob Dudley said.

The crunch on capital is not only affecting private oil and gas players but is also hitting national oil companies in the pocket, although a number of countries are leading the way in terms of creating the right business environments – among them Mexico, Dudley argued on the opening day of the 21 World Petroleum Congress in Moscow.

“The industry will be very, very careful on selecting its projects so that we can begin to generate the kinds of returns on investment that we must do as an industry,” the BP boss answered to panel chair, vice chairman of IHS Daniel Yergin.

“I think we are starting to see that all across the industry – the cost of suppliers and contractors has been going up quite significantly over the last decade.”

When asked by Yergin if this “new reality of disciple and selectivity” was being recognised around the world by resource-holding countries, Dudley was forthright in his response.

“I think the words ‘competition for capital’ cannot be overdone, whether it is inside a company or around the world. All companies have limits on how much capital they have. There are some countries around the world that are realising very quickly that they need to create (the right business environment) in order to spur investments.

“Countries that don’t understand that this great energy industry is under pressure on how it allocates its capital will be left behind and will be left to import fuel rather than (produce) it themselves.”

Yergin immediately posed the question to fellow panellist, Russian Deputy Minister for Energy Kirill Molodtsov, if his government was cognisant of such concerns. Molodstov said government it very attentive to these issues and is looking at what it can do as regards initiatives to stimulate production. Many of the issues and concerns raised at WPC would be taken back to the Ministry for debate as it looks to hammer out the country’s energy plan to 2035.

Dudley pointed to a trio of countries that are leading the way in terms of recognising the competition for oil company capital: India, Norway and Mexico.

Whereas India has its own resources, it continues to import most of its energy in advance of stimulating the requisite investment under the government of newly-elected Prime Minister Narendra Modi.

“The world is watching Norway ... and as Mexico opens up its energy markets as well, there are a lot of thoughts there about what it will do to attract investments,” Dudley said.

Yergin interjected: “One of the changes we have seen in Mexico is that it has observed what has happened with the unconventional revolution in the US. Just Texas oil production now exceeds that from all of Mexico.”

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