Centrica yesterday warned that costs for exploration and production could start rising as oil prices stabilise.
Mark Hanafin, chief executive of Centrica Business, said the sector was “cyclical” and that “upward price pressure” was a possibility.
But Mr Hanafin said costs were unlikely to reach the levels seen before the downturn, which started in the second half of 2014, when oil prices tumbled.
He said: “It’s a cyclical business and there could be upward price pressure – however, the supply chain and the industry as a whole got pretty fat when we had a long period of high prices, and I think a chunk of the efficiencies we’ve seen in the industry should be more permanent than cyclical because they just needed to come out.
“I do not think the industry is going to be quick to go back to the bad ways.”
Mr Hanafin, who last year was Centrica’s chief executive of energy production, trading and distributed energy, also said the company would carry on with its cost control measures, but that they would not cuts as deep as in previous years.
“This year, we are still trying to take costs out. It will not be anything like what we have seen in the last two years and it’s probably reasonable to project similar costs this year to next year.
“Where we have joint ventures we have benefited from partners’ efforts, particularly in Norway and Statoil have done a terrific job of reducing their costs. Where we have operational control, we have also had significant cost reductions by working with the supply chain, collaborating with others and reorganising the business.”
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