BP is in growth mode, the CEO of the company’s Lower 48 onshore operations said Wednesday, and the energy giant’s recent $10.5 billion acquisition of BHP Billiton’s U.S. shale oil and gas resources and its gleaming new digs in Denver are evidence of that.
Dave Lawler, who grew up in the Denver area, talked about the company’s new direction while sitting in a conference room of BP Lower 48’s new U.S. headquarters along Denver’s South Platte River in Lower Highland, which is in the midst of a development boom. He and about 100 employees in Houston have relocated to Denver. A hundred other people were hired locally to work in the new 160,000-square-foot headquarters.
About 400 employees are staying in Houston.
BP’s growth includes the huge acquisition of Australian-based BHP Billiton’s oil and gas resources in the United States. Lawler said the deal will allow BP to increase the percentage of oil assets in its portfolio, now at about 15 percent.
BP sees natural gas as a fuel to help reduce carbon dioxide emissions, Lawler said. “We’re still committed to natural gas, but the economics of oil right now are very, very strong.”
Natural gas prices were about $2.80 per thousand cubic feet Wednesday, compared with roughly $7.50 per thousand cubic feet 10 years ago.
BP is looking at selling its natural gas operations in the San Juan Basin in southwest Colorado, northwest New Mexico and elsewhere to help finance the BHP acquisition. With 1,350 wells, BP is the largest oil and gas operator in the Colorado portion of the basin. It employs about 100 people there.
“The San Juan Basin has been in our portfolio for decades. We absolutely love that asset, there’s no question about that,” Lawler said. “But as you know, natural gas prices are fairly low and so we’re considering selling that asset right now.”
BP won’t sell its resources in the San Juan Basin if it can’t get a good price, he added.
The shift in beefing up the oil side of its portfolio coincides with the Lower 48 onshore operations’ decision to function separately from BP’s parent company. The goal was to become more nimble when competing in the U.S. onshore unconventional oil and gas plays and using the changing technology of horizontal drilling.
As a result of the change, which came about in 2015, BP’s Lower 48 onshore operations have cut its production and other costs by 35 percent and found five economic fields to develop, Lawler said. The areas BP is concentrating on include two spots in southwest Wyoming’s Wamsutter field and the east Texas portion of the Haynesville shale play.
The wells in the areas are “very prolific,” with some of its acreage in the Permian Basin in Texas thought to be capable of accommodating up to 36 wells per square mile rather than the typical four wells, Lawler said.
BP, which operates 10,000 wells nationwide, expects the assets it is buying from BHP to produce about 200,000 of barrels of oil a day by 2025. That could boost the company’s overall daily production to more than a half billion barrels of oil equivalent, which include natural gas.
Although the focus of BP’s Lower 48 operations is shifting from Colorado’s San Juan Basin, Lawler said relocating its headquarters to Denver was a good fit.
“What we liked about Denver is that this is a very progressive community. It’s a high-tech community. There are a significant number of very large independent (oil companies) here in Denver,” Lawler said. “But it also plays a very important role in what I think is an important environmental space. This is a city and a state that care about the environment, so we see ourselves as a partner in that.”
The company doesn’t anticipate the Trump administration’s proposed roll-back of the Obama-era restrictions on methane emissions from oil and gas operations to change what it does. A proposal released by the Environmental Protection Agency on Tuesday would reduce the frequency of required inspections for methane leaks and give companies more time to make repairs.
In 2014, Colorado became the first state in the country to limit methane emissions from oil and gas operations.
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BP has been working for years to reduce methane leaks, Lawler said. The company is replacing gas-fueled equipment at well sites with solar panels. BP has a target of zero net growth in greenhouse gas emissions through 2025 and a goal of keeping the proportion of methane lost from natural gas operations to 0.2 percent.
However, the company is not on board with Proposition 112, a measure on the Colorado ballot that would expand the state’s 500-foot setback rule for drilling wells to 2,500 feet beyond structures.The oil and gas industry along with both gubernatorial candidates, Republican Walker Stapleton and Democrat Jared Polis, oppose the proposal.
“‘We’re always for good regulation and regulation that makes sense,” Lawler said.
But the proposed setbacks are not to the benefit of anyone, he added.