Page 5 - Euroil Week 05 2020

EurOil COMMENTARY EurOil
guidance range with the macro outlook rap- idly deteriorating.”
Remaining in Russia
During a webcast, Dudley and Gilvary dismissed speculation that BP might seek to sell its 19.75% stake in Rosne , Russia’s largest oil company. If anything, BP could “deepen” its strategic rela- tionship with Rosne , Gilvary said.
“ e idea that Rosne is non-strategic has got no founding. It’s still very important,” the CFO said.
BP obtained its share in the national pro- ducer in 2013 through Rosne ’s $55bn takeover of TNK-BP. It is also partnered with Rosne at speci c exploration and production projects in Western and Eastern Siberia.
Rosne has relied over the last decade mostly on large-scale acquisitions to drive growth, tak- ing on signi cant debt in the process. But it is still seen as an attractive asset. e company’s man- agement have taken steps to reduce debt, with its net debt to EBITDA ratio at a comfortable 1.4 at the end of September. Rosne also enjoys con- siderably low operating costs, estimated at only $3.2 per barrel of oil equivalent (boe) in the third quarter of 2019.
Dif culties ahead
Looney takes the reins of BP at a di cult time. Chinese e orts to contain the Coronavirus outbreak have weakened oil and gas demand at a time when markets are already oversupplied. Edinburgh-based Wood Mackenzie said on February 4 it had slashed its oil demand forecast for the rst quarter by 900,000 barrels per day to 98.8mn bpd, in response to the crisis. Russia,
Saudi Arabia and other OPEC+ members have convened for emergency talks to consider taking an additional 500,000 bpd of oil supply o ine to shore up prices.
“It’s a dilemma for the group because of the duration of the hit to oil demand – particularly from China, the world’s largest oil importer – is not clear,” Wood Mackenzie expert Ann-Lou- ise Hittle said in a research note. “Yet without a further production cut, crude oil prices will remain under pressure and struggle to hold the mid-$50 per barrel price for Brent, let alone recover to above $60 per barrel before Q2 2020.”
BP and other Western majors are also under unprecedented pressure to reduce their carbon emissions in line with Paris climate goals. Banks and other investors are facing calls from share- holders to cut all ties with fossil fuels, and envi- ronmental NGOs have even begun taking legal action against oil companies over their carbon footprint.
In a stunt to mark Looney’s rst day as CEO, Greenpeace on February 5 shut down BP’s cor- porate headquarters in central London. In a response, BP said that Looney “shared [the pro- testors’] deep concern about climate change” and would “set out his low-carbon ambition for the company next week.”
Like other European oil companies, most recently Sweden’s Lundin Petroleum last week, BP is likely to publish a set of targets for reduc- ing its net carbon emissions to zero, by investing in carbon capture and other new technologies over the coming years. Whether doing so will win over the company’s critics is another mat- ter. ™
BP has a 19.75% stake in Rosneft, Russia’s biggest oil producer, which it insists it has no plans to divest.
Week 05 06•February•2020 w w w. N E W S B A S E . c o m
P5