With the start-up of the massive Khazzan field in Oman, six of BP’s seven major projects for 2017 are now online – and six of those total seven are natural gas projects. BP Magazine talks to Gordon Birrell, Upstream chief operating officer, production, transformation & carbon, about this strategic shift to gas, and the continuing importance of oil in the portfolio
BP is shifting its upstream portfolio towards gas – why is that?
BP has always produced energy that has lifted people out of poverty and provided economic growth. However, today we are in a world faced with a dual challenge - to continue meeting society’s needs for more energy while at the same time reducing carbon emissions. Using natural gas - an abundant, lower carbon energy source - is a good way to help to meet both those aims. And BP has great access to some very strategic and competitive gas resources such as the Khazzan field in Oman, Shah Deniz in the Caspian and, of course, the emerging region of Mauritania-Senegal, where we have set up a successful partnership with the potential to build a material new gas business. So, BP is well-placed to produce gas in the modern world.
Does this shift mean that BP is no longer investing in oil production?
No. Oil is and will remain an important part of the portfolio. If you look at BP's Energy Outlook, we see world demand increasing by about 30% between 2015 and 2035 and oil continuing to be one of the dominant sources of energy during this period.
BP has production in some of the world's best oil-producing basins and some important long-term, trusted partnerships with local resource holders. The key here is that we ensure we are a highly cost-effective oil producer so that we are increasingly competitive.
We expect oil to remain in BP’s energy mix for a long time to come.
Coming back to gas, it has been described as a ‘bridging fuel’ towards a lower carbon future. Is it just a bridging fuel or does it go beyond that?
I think it is much more than a bridging fuel; it’s a destination fuel, and what’s more, it’s really coming of age. This year, six of our seven major upstream project start-ups are gas, including our biggest project, the Khazzan field in Oman. The flexibility of gas makes it an attractive prospect long-term.
What are some of the highlights in BP’s gas portfolio today?
Khazzan. Our latest start-up is exciting, not just for its scale but because we have deliberately designed it to be inherently efficient and low in greenhouse gas emissions through the use of a central processing facility that reduces the need for processing equipment at each individual well site.
Our existing Shah Deniz development in Azerbaijan has the lowest carbon intensity of any of our existing operations, and our Tangguh LNG facility in Indonesia has one of the most energy efficient liquefaction processes anywhere in the world.
Another important thing to remember is the extent to which the countries themselves are benefitting from this new production. In Egypt, for example, all of the gas produced at our new West Nile Delta project will be fed into the national grid, helping to secure the country’s energy supply for decades to come.
How does BP’s portfolio compare to its peers? How do we differentiate ourselves, when the whole industry is shifting to gas?
Between this year and 2020, BP is projected to see the greatest growth in gas production of all the supermajors as new projects come onstream. We have a great team who really understand the gas business, everything from reservoirs through to markets. And we’ve been shifting towards gas for a number of years now. Our gas-biased portfolio today is a very deliberate move. With an abundance of gas in the world, it is crucial that as a producer we are at the low end of the cost of supply curve. Our modernisation and transformation agenda has a key role to play here, helping to make us more efficient.
Our focus on technology also differentiates us, including our experience in carbon capture, use and storage (CCUS), where we been involved in two demonstration projects, in Abu Dhabi and in Algeria.
Even though gas is cleaner than coal when burned to generate power, its production can result in the release of methane which has a more potent warming potential than carbon dioxide. How does this affect the ‘lower carbon gas’ message?
Gas is lower carbon; as a fuel in power generation, natural gas emits far less carbon dioxide than its main competitor, coal. But there does need to be a concerted drive to tackle methane emissions, because it is well known that unburned methane, the main constituent of natural gas, emitted to the atmosphere, has a higher global warming potential than CO2. So, making sure that we manage the potential for methane emissions as we produce our gas is key.
We want to be an industry leader in this space and we are working on a number of new technologies that will help.
Khazzan is one example of a new plant designed to very high standards with centralised equipment which enables us to manage emissions more effectively. Tackling the methane challenge is also something we are working on with the wider industry, through the Oil & Gas Climate Initiative (OGCI) which our CEO, Bob Dudley, chairs.
Is it just the Upstream who are looking at low carbon solutions?
As an organization, BP has clearly signalled its intent to help advance the energy transition and there is a lot of work going on across the Upstream and the Downstream and in our Alternative Energy and trading businesses to find ways to support that intent. Our efforts to shift to gas are just one crucial piece of this important jigsaw puzzle. Every part of the BP business has a tremendous amount to bring to this.