BP CEO: Economic slowdown will last years
Recessions in the world's largest economies will last for years, dragging down crude-oil demand and prices, BP Plc Chief Executive Tony Hayward said today.
China and India will lead the recovery in energy consumption as the world's most-populous nations expand their industrial sectors and more citizens move from the countryside to cities, Hayward said in a presentation at a Houston energy conference.
"I believe over the next few years we will see economic growth recover, driven by continued industrialization in China and India and the emergence first of America and then of Europe," said Hayward, whose company lost $36 million a day in the fourth quarter amid slumping fuel demand.
London-based BP, the world's fifth-largest oil company by market value, plans to invest about $6 billion a year over the next decade on U.S. projects, Hayward said today. BP is expanding Gulf of Mexico crude output and increasing fuel production at its two biggest U.S. refineries hobbled by fires and hurricanes.
Global energy demand is plunging just as BP lifted crude output for the first time in three years. The U.S. economy, the world's largest, will shrink by 1.5 percent this year, according to the median of 59 forecasts in a Bloomberg News survey of economists last month.
"The challenge for all of us is to not allow this cyclical fall to pitch us into a structural loss in capacity," Hayward said at the conference sponsored by Cambridge Energy Research Associates.
Plunging Prices
Oil prices traded in New York have plunged more than $100 a barrel since reaching a record $147.27 a barrel in July. BP and other crude producers can profit from oil production despite lower prices as soon as they get costs that soared during last year's boom under control, Hayward said.
"It is only four years ago that the oil price was $40," Hayward said. "I thought $40 was a fantastic price. The industry worked very well at $40 a barrel."
When economies start growing again, energy consumption will rise faster than supply, pushing prices higher, he said.
"I don't believe anything about the medium- and long-term has changed," Hayward said.
Since succeeding John Browne as CEO in 2007, Hayward, 51, has boosted profit, raised dividends, cut jobs and overseen oil discoveries from Angola to the North Sea that will add reserves. The University of Edinburgh-trained geologist plans to spend more than $400 million a week worldwide in 2009 to find untapped fields and increase fuel production.
Brazilian Ethanol
The company is spending $50 million a year researching ways to make ethanol and other petroleum alternatives from crops, Hayward said. The company is focusing on sugar-based ethanol from Brazil rather than fuel distilled from U.S. corn, which Hayward said is "not sustainable" because of high costs.
The equivalent of one in six U.S. ethanol mills shut this year after volatile corn prices squeezed margins and forced some operators into bankruptcy. U.S. law requires oil companies to add the fuel to gasoline to stretch supplies and boost farm incomes.
BP operates five U.S. refineries that in aggregate can process 1.54 million barrels of crude a day, according to data compiled by Bloomberg.
BP's larger rivals by market value are Irving, Texas-based Exxon Mobil Corp., PetroChina Co. of Beijing, the Hague-based Royal Dutch Shell Plc and Chevron Corp., which is based in San Ramon, California.