BP to form separate business to manage onshore assets in U.S. Lower 48

BP has announced its intention to establish a separate business to manage its onshore oil and gas assets in the U.S. Lower 48.

The U.S. Lower 48 onshore oil and gas business environment has unique characteristics. Responding to these, the new business will operate separately from the rest of BP and will be designed to adapt to the rapidly changing and hyper-competitive energy landscape in the region. This move is expected to help unlock the significant value associated with BP’s extensive resource position in the U.S. Lower 48 onshore, which BP currently oversees through its Houston-based North America Gas group.

“Over the last few years, we have fundamentally reshaped our North America Gas portfolio,” said BP Upstream Chief Executive Lamar McKay. BP has done so by divesting non-core assets and focusing development in leading U.S. unconventional plays like the Eagle Ford shale in South Texas. “Now it’s time to reshape the way we run the business—and we are very excited about this bold step forward,” he said.

BP will own the new U.S. Lower 48 onshore business. But the business will be led by a separate management team and be housed at a new location in Houston, apart from BP’s Westlake campus. It will have separate governance, processes and systems designed to address the unique competitive and operating environment in the U.S. Lower 48 onshore. BP is expected to begin disclosing separate financials for the new business in 2015.

These changes are chiefly intended to improve competitiveness of the U.S. Lower 48 onshore business through greater speed of innovation, faster decision-making and shorter cycle times from access through to production, together with more efficient cost management.

The changes to BP’s U.S. Lower 48 onshore business are consistent with the group’s strategy of delivering value over volume. BP also believes these moves will enhance efforts to develop industry-leading technology that will be a critical part of BP’s global strategy in unconventional oil and gas resources going forward.

“Participating in the U.S. Lower 48 onshore is key to our upstream strategy because we believe the region will remain at the forefront of innovation and drive global learning in unconventional resources,” McKay said.

The approach BP intends to pursue for its U.S. Lower 48 onshore business is specifically designed in response to the unique business environment in the region. Much of what BP does in other onshore regions around the world will continue to rely on the scale, capital, technology and project management capabilities that only a major international oil company can provide.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By O'Niel Petroserve Nigeria Ltd, online.

Spain expands constitutional challenge to allow fracing

Spain’s government will seek to overturn a ban on fracing in the wine-making region of La Rioja, relying in part on the European Union’s January guidelines for the drilling technique.

The cabinet voted today to file a constitutional challenge to La Rioja’s prohibition on the water-intensive method used to explore for oil and gas. The ban wrongly strips authority from the national government to regulate prospecting and runs contrary to Spanish law and preliminary EU rules that endorse fracing, the cabinet said in a statement.

The decision widens a policy to wrest control from regional governments over fracing. The cabinet this year voted to appeal a similar ban on fracing in Cantabria, a region that like La Rioja is in the north and is relatively rich in water resources.

The move today is a “logical step” given that Spain had previously acted against Cantabria, Juan Klimowitz, co-owner and general manager of exploration consulting firm Gessal in Madrid, said today in an interview. “It makes sense since the regions went outside the national law that covers hydrocarbon exploration.”

The central government began requiring environmental impact assessments on all fracing projects last year before deciding on permits for those that passed. It says allowing environmentally safe prospecting is necessary in a country dependent on oil and gas imports.

Wine has been cultivated for more than 1,000 years in La Rioja, which is home today to more than 500 vineyards including Marques de Riscal SA and Ramon Bilbao SA.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By O'Niel Petroserve Nigeria Ltd, online.