BP profits soar to £42m a day as the oil price doubles

With consumers - motorists and householders - buckling under record petrol and home gas prices, BP shareholders are sharing in the windfalls, with dividends topping £2.5 billion this year so far, 33% higher than in the first half of 2007.

BP's underlying profits of $15.2 billion for the first half of the year represent growth of 53%. But this has little to do with increased production or improved running of BP's refineries and everything to do with the oil price, which has doubled in the last year.

The oil giant admitted production in the second quarter averaged 3.83 million barrels of oil a day, broadly unchanged on the same period last year but down from the first three months of 2007. Average output for the first half of 2008 as a whole was flat at at 3.87 million barrels a day.

Of BP's total profits for the half year, $13.1 billion came from exploration and production. The company's BP's profitability would have been greater but for continuing poor performance of its refining and marketing business.

BP has suffered from the poor availability of its refineries for the key US market at Texas City and Whiting, and is now being hit by the high price of crude and weakening demand for gasolene in America, which is slashing its profit margins.

Profits from refining and marketing more than halved to just $799 million for the half-year. "We have a very strong upstream [production] portfolio with a going reserve and resource base," said chief executive Tony Hayward.

"Our challenge is to convert that strong base into growth in production and cashflow over the next few years. Our downstream business [refining and petrol pumps] has been doing badly in the past few years, while many of our peers have been doing very well."

He added: "Our costs have become uncompetitive. This is a major opportunity for improvement and we are grasping it with both hands." BP shares jumped 10p to 5291/2p today after Hayward promised to boost production in the second half of this year and early next.

The state-of-the-art deep water Thunder Horse project, out of commission since the hurricanes of 2005, is gradually coming back online with a view to being into full production in the second half of 2009.

BP shareholders are to get a secondquarter dividend of 14 US cents, which in sterling terms is 7.039p compared to 5.278p a year ago.