Synopsis
India's government has introduced the Samudra Manthan policy to enhance energy security through increased oil exploration. BP's CEO Meg O'Neill highlighted India's attractive conditions for foreign investment and exploration. This policy involves significant funding to support the development of discovered resources. BP is actively exploring current opportunities, aiming for growth and development in its portfolio. The company intends to remain independent while adapting to evolving global energy landscapes.
The Indian government’s new oil and gas policy aimed at boosting energy security has all the provisions needed to attract the biggest energy explorers such as BP Plc, which is actively looking at bidding for blocks, its chief executive said.
“We always ask ourselves: Where do we have exploration opportunities, coupled with attractive fiscal and legal terms, and a government that is supportive of foreign investment coming in?” BP CEO Meg O’Neill said in an interview.
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“Well, with India, we have all of those elements.” The cabinet announced the Samudra Manthan policy in July that looks to accelerate deep-water oil exploration. It comes with an outlay of around Rs 84,000 crore and is designed to improve India’s energy security at a time when global supply chains have been disrupted due to economic sanctions on Russia and the US-Iran war.
“I’ll give credit to Prime Minister (Narendra Modi) and the (oil) minister for the Samudra Manthan reforms they have put in place to try to encourage companies to do more exploration and provide funding for infrastructure that’s required to develop some of the small resources that have already been discovered,” said O’Neill.
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“We are actively looking at the current exploration rounds.” BP Plc, classified as one of the Big Oil giants along with Chevron and ExxonMobil, is moderating its activities in parts of West Asia. “We are not sending ships that are BPchartered into the Gulf at this point in time,” said the CEO, referring to the Strait of Hormuz blockade.
“It’s just too much risk for us.” The company, with resources and markets spread across continents, doesn’t feel the pinch of trade tariffs that have upended the global order. “Some of the tariffs that have been imposed recently... haven’t particularly moved the needle on global trade,” said O’Neill. “So, I think the world will continue to be quite adaptable, but it’s going to be volatile.”
BP chief executive Meg O'Neill is steering the energy major back towards oil and gas to drive growth, while streamlining its portfolio and strengthening its balance sheet amid global energy turmoil. Having taken charge in April after a rapid succession of CEOs, she insists BP is not being pared down for a sale and intends to remain independent.
In an interview with Sanjeev Choudhary, O'Neill discusses India's exploration potential, global oil market disruptions and BP's strategy in an uncertain world. Edited excerpts:
Two wars are underway, and markets are in turmoil. What kind of world are we entering?
Over the last 40 years, the world has become increasingly interdependent, with global trade enabling the relatively efficient flow of cost-effective products and services to customers where they need them. A lot of the debate right now is whether, given the conflicts that are happening and some of the fractures we are seeing in the world order, will that continue?I step back and see governments around the world saying there are some things for which they need to increase their resilience or independence.But a lot of the product flows are so embedded in the world economy that it is hard to envision them changing in a material way.If you think about some of the tariffs imposed recently, they have not particularly moved the needle on global trade. So I think the world will continue to be quite adaptable, but it is going to be volatile.
What are the big risks you see for businesses?
Planning in a world of uncertainty is always difficult. But I would say that in some ways, that is the nature of the oil and gas industry. If you look back over time, we have been an industry that has periodically had quite significant price shocks and price spikes. You always need to be able to see through them and get to the underlying big macro supply-demand questions. Policy changes are a risk everywhere we operate in the world. That is nothing new.
Did you ever think the Strait of Hormuz would close?
No.
Did it surprise you that markets were able to adapt?
Yes. The world was surprisingly adaptable. Now a bit of that was, we will call, a shock absorber: things like Russian crude that was on the water, Iranian crude on the water, petroleum reserves. So, there was a bit of a shock absorber in the system, and we think that has largely been drawn down.
China's imports in this period have been four or five million barrels per day, lower than in the same period last year.
Earlier, people would expect OPEC to help calm oil market. This time, China, by cutting imports, helped the market. What does China's conduct tell you about the future of the oil market?Maybe I will comment on what it says about China. What we have seen in the past six months is the result of 20 plus years of hard work to diversify their energy system, to build domestic energy resources, whatever is available. It is also a nation that plans for long-term energy resilience.Japan and Korea are also nations with robust economies that do not have the benefit of significant domestic energy, and they are very thoughtful and very long term in their planning, but they have not had the ability to absorb the shock the way China has.
If Hormuz stays closed for another six months, what kind of concerns would you have?
I don't like forecasting where oil prices are going to be or where markets are going to be. That is typically a pretty fraught exercise. It is very easy, though, to describe a world where the price of oil next year is $150 a barrel, if the situation stays as it is. You know, there are transits getting through the Strait of Hormuz now, but if those dry up again...Or you could have a situation where the price of oil is $50 a barrel.
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That would be a scenario where peace is declared on multiple fronts, Russia's unsanctioned, Iran's unsanctioned and Venezuela continues to ramp up production.So, it makes it incredibly hard to plan.Now, in our business, we try to plan for the worst and be prepared for a situation where we are able to respond more dynamically to meet our customers' needs.
Total CEO recently said he preferred an age or time of disruption because it offered opportunities. What is your view?
When disruption happens because of war and people are losing their lives and their homes and their livelihoods, that's a terrible thing. So that's certainly not the sort of disruption that we want in our world. One of the things we have demonstrated is that in periods of volatility, for whatever reason, the BP team can be highly adaptable to meet the needs of our customers.
Is your trading arm currently active in the Persian Gulf?
If I speak about Gulf business holistically, we have a bit of upstream production in Iraq. We have production entitlements in Abu Dhabi. The direct production impact is relatively modest. We are not sending ships that are BP chartered into the Gulf at this point in time. It is just too much risk for us.
How do you imagine India in your global portfolio?
We always ask ourselves where do we have exploration opportunities coupled with attractive fiscal and legal terms, and a government that is supportive of foreign investment coming in. Well, with India, we have all of those elements.And I will give credit to the prime minister and the minister for the Samudra Manthan reforms that they have put in place to try to encourage companies to do more exploration and to provide funding for infrastructure required to develop some of the small resources that have already been discovered.And so, we are quite excited about exploring.
Globally, you have been simplifying your portfolio. How would that impact India?
Again, when we look at the portfolio, we ask ourselves, what are the assets that are profitable? What are the assets that have future growth potential? When we look at the India business, we see that future potential.
Why has BP not been a very active participant in previous exploration rounds in India?
I cannot speak to past decisions. Probably my colleagues could provide better insights as to those decisions, but we are actively looking at the current exploration rounds.
What would BP look like in three years?
The headline that I have given our investors is that we need to get fit to grow. So, we have a lot of work to do to get ourselves in shape.
Some people have the view that you may be shrinking BP to make it fit for sale...
BP has probably been an independent company for more than 100 years, and we intend to remain as such.
