BHP Billiton has reaffirmed its optimistic view on oil markets as it looks to invest further in the sector amid a steady recovery in prices.
The resources giant expects oil demand to rise and level with supply for the first time in nearly three years in 2017, and forecasts even more "compelling market fundamentals" over the next five to seven years.
"Based on modestly higher growth in absolute demand and the need to replenish existing natural field decline, we estimate the world will need about 30 million barrels of oil a day by 2025," BHP Petroleum Operations president Steve Pastor said.
"We think investing counter-cyclically is a smart idea."
His comments come days after BHP finalised an agreement with Mexico's PEMEX to invest in the deepwater Trion oil discovery in the Gulf of Mexico. BHP will spend a minimum of $US382 million, and up to $US1.2 billion, exploring the offshore permits.
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The company last month approved a $US2.2bn investment for a share in the Gulf of Mexico's Mad Dog Phase 2 crude oil project.
"Most of our focus on long-term renewal is based on tier-one conventional assets," Mr Pastor said.
He said the company also has short-term flexible opportunities to boost production, particularly through its stakes in North American shale gas developments in the Permian and Eagle Ford.
"Right now, we have an abundance of high quality gas in our portfolio, but quite frankly, we are a bit more bullish on oil," Mr Pastor said.
BHP stripped its shale drilling program to a minimum in 2016 after a collapse in oil and gas prices forced it to write down the value of its US shale assets by $US7.2 billion.
Crude prices have recovered gradually and currently trade around $US53 a barrel.
The company has preferred to focus on developing its conventional petroleum business, which has some of the lowest unit cash costs in the industry.
BHP bounced back to profitability in the six months to December, as a rebound in prices for iron ore, coal and petroleum contributed to a $US3.2 billion profit.
Its shares were down 32 cents, or 1.3 per cent, at $25.18.
