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BP chief vows to invest in North Sea projects

THE chief executive of BP has underlined the company's enthusiasm for the North Sea and said recent tax changes could help ensure the area remains an important oil and gas province for years to come.

After BP announced strong third quarter results, Bob Dudley said the North Sea is one of four key areas in which it will invest heavily as it looks to overcome the disastrous Gulf of Mexico spill in 2010.

While some say the North Sea is in terminal decline, Mr Dudley highlighted the potential BP sees to increase returns by investing in bumper projects in UK waters.

Devenick and Kinnoull in the UK North Sea are included in 15 giant developments BP expects to bring on-stream by the end of 2014, which it predicts will power a big increase in cash generation.

The company has also committed to invest in the Schiehallion redevelopment and Clair Ridge projects off Shetland.

BP includes the North Sea in a group of four higher-margin areas with Gulf of Mexico, Angola and Azerbaijan.

The company moved to secure a long-term interest in the huge Russian market through last week's agreement to sell its half of TNK-BP for $12.4 billion (£7.8bn) plus a 19.75% stake in state-controlled Rosneft.

Signalling confidence in BP's prospects, directors lifted its quarterly dividend 12.5% to nine cents a share. This will be good news for shareholders, including many pension funds.

Regarding tax breaks granted by the UK Government since it hiked the tax rate payable on North Sea profits in the 2011 Budget, Mr Dudley said: "We made some very large commitments to develop some of the large fields north-west of Shetland that weren't dependent on these changes being made but I think it's good, flexibility is good, listening to economic reason has been very sensible."

He added: "What the Government has done is recognise smaller fields close to infrastructure were going to be less and less economic so they've reversed part of those plans announced in 2011 to ensure the longer life of the North Sea."

Mr Dudley said the industry has laid out how the regime could be fine-tuned to ensure the North Sea "remains a thriving oil and gas province for many years".

The American executive, who took charge after the 2010 spill from BP's Macondo well, said the company has been making good progress with the 10- point strategic plan it developed subsequently.

This has involved selling $35bn assets to help meet the costs of the spill.

But there remains considerable uncertainty about what the final cost of the Gulf disaster will be. The company has provided $38bn but the bill could spiral if it is found to have been grossly negligent. BP has been trying to agree a settlement with the US Department of Justice and other federal agencies.

The company said: "BP has repeatedly said it is willing to settle on reasonable terms but otherwise continues to prepare vigorously for the start of trial MDL 2179, now scheduled for late February 2013."

BP's third-quarter underlying replacement cost profit fell to $5.2bn from $5.5bn a year ago. A shrinking business, lower production and lower crude prices were partly offset by strong refining margins and high refinery availability.

The result beat analysts' expectations of around $4.1bn, mainly because of the record refining result.

Shares in BP closed up 4.2%, 17.85p at 442.85p.

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