Oil price drives BP to record profits

OIL major BP revealed yesterday that it has no plans to sell any more North Sea assets, as it reported its biggest-ever quarterly profit, boosted by oil and fuel prices sent higher by the war in Iraq.

The company, which sold off its Forties field in January, reported a net profit adjusted for exceptional items up 136 per cent at U$3.73 billion (2.35 billion) - or 300 per second - at the top end of analysts’ expectations. Supply concerns linked to the war in Iraq, strikes in Venezuela and civil unrest in Nigeria, pushed the average price of crude oil to a 12-year high in the first three months of 2003.

But with the oil price down another 35 cents at $23.15 a barrel yesterday, BP chief executive Lord Browne said the trading environment had already weakened in the second quarter, with few signs of an immediate recovery in the world economy. He added: "To say that the world is not troubled right now would not be right."

Browne also warned that with the rising tide of investor anger over fat-cat salaries, UK directors must be prepared to accept smaller pay packets.

BP caused concern last year when it said it would sell off some of its mature assets to invest in riskier areas, such as Angola and Azerbaijan. After Forties, it sold a package of southern North Sea gas assets to French firm Perenco. BP will still seek to raise between 3bn and 6bn from divestments this year to offset forecast capital expenditure of 14bn, but it will get rid of no more in the North Sea. It still accounts for 20 per cent of the UK’s oil and gas production.

BP has sanctioned a 300 million investment in the Rhum gas field, 16 miles from the Bruce field in the North Sea. It has co-owned Rhum with Iran’s state oil firm since its discovery in the 1970s, but advances in technology mean it is only now economically viable to begin production.

The company emphasised that its growth was not dependent on getting involved in production in post-war Iraq, which has the world’s second largest oil reserve base.

Shares in BP dipped 3.25p to 399.75p as analysts pointed to weaker-than-expected sales from BP’s refining and marketing arm and flat operating profits from its chemicals division.

The company maintained it made "remarkably little" profit from its UK petrol stations, where it is trying to improve performance by selling more coffee and sandwiches.

Browne, who saw his pay cut by 32 per cent to 3.9m last year to reflect the oil giant’s poor underlying performance and a falling share price, said he thought remuneration packages in the US - from where the UK takes its lead - would fall after bad publicity from high profile pay-offs for failure.

Companies must also account for executive share options on their balance sheets, he said. "Something will definitely change, and I don’t think it will be upwards in the US."

He also defended allegations that the company, Britain’s largest, was too close to the government, from which it had gained the nickname "Blair Petroleum". Browne said: "I don’t think that is fair or reasonable or actually well-judged because it’s simply not true."