BP has underlined how much money it expects to generate in the North Sea in coming years despite falling deep into the red amid the fallout from the coronavirus crisis.

The giant made a $5.7 billion (£4.2bn) underlying loss last year, compared with a $10bn profit in 2019, as it felt the impact of the market turmoil triggered by the Covid-19 pandemic and associated lockdowns.

“2020 will forever be remembered for the pain and sadness caused by Covid-19. Lives were lost – livelihoods destroyed,” said BP’s chief executive Bernard Looney. “Our sector was hit hard as well. Road and air travel are down, as are oil demand, prices and margins.”

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However, Mr Looney told analysts that the company thinks the outlook for the market is improving with vaccines expected to provide a boost to demand.

The world will recover, predicted Mr Looney, who announced plans to reinvent BP to help the company play a part in the global drive to cut carbon dioxide emissions after succeeding Bob Dudley in February.

He said the North Sea was one of eight key basins in which BP expects to make profits that will allow the firm to invest in areas such as renewables, while making payouts to investors.

Mr Looney said BP is making good progress with its plans to develop a big presence in industries such as wind power and hydrogen fuel production.

However, he noted the company may not start to generate a material cash return on the hefty investment it is making in markets such as offshore wind in the US until the 2030s.

While BP expects its oil and gas operation to shrink in coming years, a “resilient and focused hydrocarbons” business will remain a key part of the mix for some time.

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This will involve BP focusing on the areas in which it can achieve the highest margins on production while looking to reduce costs where possible.

The fact that the North Sea is still regarded as a core region by BP will be welcomed in the area, in which the industry is grappling with a deep downturn. Oil and gas firms have slashed spending and put assets up for sale in response to the fall in oil and gas prices triggered by the coronavirus.

In its annual results announcement, BP said highlights of the latest quarter included the starting up of production from the Vorlich field in the North Sea.

However, it seems unlikely that BP will reverse a policy under which it has focused on a narrow range of plum assets in the North Sea. These include giant fields developed West of Shetland in recent years.

Mr Looney said BP will focus on near-field growth opportunities close to its existing oil and gas assets.

BP sold off a range of North Sea assets and cut hundreds of jobs in response to the sharp fall in the crude price from 2014 to 2016.

It is in the process of shedding around 10,000 jobs globally under a programme launched to cut costs in response to challenging market conditions and to help get it in shape for the energy transition.

HeraldScotland: Glasgow-born Emeka Emembolu took charge of BP's North Sea business in July Picture:BPGlasgow-born Emeka Emembolu took charge of BP's North Sea business in July Picture:BP

This will result in a reduction of around 11% in staff numbers.

BP has not said how many jobs will be lost in its North Sea operations which are run from Aberdeen.

The company employs around 1,000 in its North Sea business, compared with 1,150 in June.

BP cut the valuation of its North Sea assets by around £350 million in the first quarter.

Glasgow-born Emeka Emembolu became head of the North Sea business in July.

Other core oil and gas areas include the Gulf of Mexico.

BP benefited from the increase in oil prices recorded in the fourth quarter, following positive developments on the vaccine front and moves by major exporters led by Saudi Arabia to cut production to support the market.

It made $115m underlying profit in the quarter on the standard replacement cost measure, against $2.6bn last time.

The group declared a 5.25 cents per share dividend for the quarter in line with the policy set out in August. The group cut its dividend by 50% in that month, from 10.5 cents, The cut was the first made by BP since 2010, when the disastrous Gulf of Mexico oil spill left the company facing multi-billion dollar costs.

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The group plans to resume share buy backs when net debt has been reduced to the desired level, $35bn. Net debt fell to $38.9bn last year, from $45.4bn.

BP shares closed down 12.1p, at 255p.

Stuart Joyner, at the Redburn research firm, said BP’s operating cash flow appeared to remain weak. He added: “We will likely see net debt worsen in Q1, which will temper expectations of better shareholder distributions.”

Brent crude traded up $1.17 per barrel yesterday afternoon, at $57.52/bbl. The price fell from around $70/bbl in January last year to less than $20/bbl in April.