Despite BP’s (LON: BP) North Sea boss being hopeful about the future of oil and gas in the UK, Doris Reiter says uncertainties driven by government policy are undermining investment confidence and the energy transition.
Reiter, senior vice president of North Sea for BP, told Energy Voice: “I always like to look at the bright side of life, and yes, the basin is mature.
“BP has been here 60 years and we still have a strong business where, under the right fiscal environment where investment allowances are fully retained and there is a clear end date to the windfall tax, then we could have many more years ahead.”
The supermajor’s North Sea boss pointed out that the Labour government has said it is looking to ensure continued production of existing assets, something that could benefit BP’s massive Clair field.
“We are one of the largest holders of undeveloped resources in the basin,” Reiter explained.
Keir Starmer’s Labour said in the build-up to the general election, in which it won by a landslide, that it would honour all existing oil and gas licences in the UK and “manage our existing fields for the entirety of their lifespan”.
Reiter commented: “I believe the government themselves have said they want an orderly transition, they want oil and gas to continue being part of the energy mix as we transition to a low carbon energy future. Now they need to put a fiscal regime in place that enables this.”
Capital competition
But with “hundreds of millions of pounds or even billions of pounds of investment” potential in the UK with BP’s various existing fields, Reiter said that there needs to be a good case to keep the company’s capital in the UK to continue production at these sites.
“We need to have certainty,” she said.
“We need to have long-term fiscal stability and the conditions need to be right to continue investing.”
That being said, Reiter explained that in the “current fiscal circumstances things are stacking up well in the global portfolio” for the UK.
BP is making capital allocations on a “case by case” basis.
Describing operations from 2022 to 2023, Reiter shared that the firm went from having “one rig line to four rig lines.”
She added: “That also meant the additional capital allocation. We sanctioned the Murlach project last year … so that’s in progress. So, we certainly have been able to continue to attract the capital.”
But to continue securing these funds, the regional BP North Sea business will need to continue making a good case for capital and prove that a return on investment is likely. Otherwise BP regions such as the Gulf of Mexico, will feel the benefit of increased capital as funds are redirected there.
BP’s strategy in the UK currently centres around the Clair, Schiehallion and Eastern Trough Area Project (ETAP), hubs.
Reiter explained: “I want to bring us back to the opportunities. The more than one billion barrels of undeveloped resources that we have in our portfolio.
“They all exist around our existing hubs and that’s our strategy – to focus on developing barrels in our catchment.
“It’s around the Clair field, infill drilling around the Schiehallion field and continued tiebacks like we’ve seen with Seagull.
“Murlach is the next one coming on stream next year, so that’s what we’re focusing on.
“And those investments, under current conditions, are quite competitive. And again, that’s why we’re engaging with the government to ensure there’s a strong understanding of what’s required to retain investment here.”
Treasury talks
Last month Treasury Minister James Murray travelled to Aberdeen to engage with the industry regarding its concerns with the UK’s fiscal environment. BP was in attendance at this forum.
Following this meeting, Murray took time to speak over video call with offshore workers.
Reiter explained: “We had an OIM [offshore installation manager] calling in from offshore describing the impact on the workforce.
“Talking about people coming up from the Humberside, Teesside areas, for example, to go work offshore.”
She said that these conversations between the workforce and government are “really important”.
“People focus on the global profits we make,” she added.
“But you know this is still a regional business and it needs to stand on its own feet for longevity and for that it needs to generate decent returns to remain competitive which ultimately is the underpinning for continued jobs, continued investment and so forth.”
Workforce worries
While BP is cautiously hopeful, others have offered some stark warnings. Oil and gas operators across the United Kingdom have spoken out about the removal of the windfall tax’s investment allowances and the increased rate under Labour.
Some have said that Labour’s tinkering will kill off investment in the country’s waters while Panmure Gordon director and oil and gas research analyst Ashley Kelty argued the changes will “hasten the demise of the North Sea”.
Headlines such as these have not escaped the attention of the UK’s oil and gas workers who have shared concern around how dwindling investment will impact their employment.
Reiter admitted: “Obviously, people read newspapers, whether it’s online or in print, and yeah, it is a concern and clearly it brings a lot of uncertainty with it.”
A lifelong engineer, Reiter spends time going offshore to connect with BP’s workforce. She said that she has been telling those on her firm’s platforms that she understands their concerns.
She said: “What I try to tell them is your job is to focus on continued safe production offshore and I understand the concerns we have.
“We are engaging constructively with the government to make sure that they understand what is considered a stable fiscal environment and conducive for continued investment.
“But ultimately it comes back to people, jobs, careers and livelihoods. That is what is at the heart of this and it’s what makes me want to get up every morning and come to work and what makes me determined to build on BP’s 60-year legacy in the North Sea.”
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