Asian firms may be the ones spending the latest billions in the oil sands, but the new head of BP plc has a message for the oilpatch: don’t count out the British.
BP is on the hunt for more assets around Fort McMurray, said Christina Verchere, who took over as president of Canadian operations for BP four months ago.
“BP is interested in oil sands,” she said in an interview, in which she sketched her ambitions for a company with a long history in Canada but a difficult recent past that saw it shed all of its producing assets in the wake of the Macondo spill.
BP’s Canadian staffing count, since 2010, has diminished from 2,000 to 450 after it sold its natural gas and natural gas liquids assets to Apache Corp. and Plains All American Pipeline LP in a pair of transactions together worth $4.92-billion (U.S.). The company still runs an energy trading operation in Canada, but no longer produces a single barrel of oil or cubic foot of gas in the country.
“It’s been a tough couple years,” Ms. Verchere said. Her mandate: “let’s build the organization, increase the number of people we have – and let’s grow our position in oil sands.”
She declined to detail how much BP is seeking to buy, but it’s clear the company has a newly-stoked appetite for Canadian bitumen, which it sees as a particularly compelling element in its global search for so-called elephant finds.
“There is no greater giant field than the oil sands,” said Ms. Verchere, a U.K.-born economist who has spent her career bouncing between London and Houston.
BP has been in the oil sands since 2007, and has entered a series of joint partnerships with Husky Energy Inc., Devon Energy Corp. and Value Creation Inc. Though some of those projects are at very early stages – it is still determining how much oil it has at its Terre de Grace project with VCI, for instance – BP believes it will achieve 200,000 to 400,000 barrels per day by 2025. Acquisitions could boost that figure, or allow BP to more rapidly sell oil sands crude, since with its current properties, first oil is not expected until 2014 from Sunrise, its joint project with Husky.
Still, BP’s oil sands ambitions come amidst numerous headwinds: Royal Dutch Shell plc has called north-eastern Alberta the most expensive place in the world to develop, and Suncor Energy Inc. said this week it was taking a hard look at new projects worth of tens of billions of dollars, in hopes of boosting their profitability.
“You’ve got a perfect storm that’s occurring right now,” Ms. Verchere said, pointing to high construction costs at a time of tempered oil prices.
But, she said, “with time that will find a way of balancing itself out.”
Relative to other global oil plays, the oil sands are “higher cost, but we think higher upside as well,” Ms. Verchere said, referring to the long life of projects that can produce oil for decades. That longevity can provide a counter-balance to BP’s deepwater projects, which produce a big, but relatively short, burst of cash.
Ms. Verchere pushed back at a suggestion that BP is late to the game in oil sands, given the more advanced projects that belong to other super-majors like Shell, ExxonMobil Corp and Total. Being first at something new comes with disadvantages, too, she argued, suggesting BP may be able to avoid mistakes that others have made.
“I distinguish between later versus late,” she said. “I think we’re later, but I don’t think that’s shut us out yet.”