Feb. 27 (Bloomberg) -- BP Plc, Europe's second-largest oil company, said it can maintain crude oil and natural gas production at 4 million barrels a day through 2020 with its current reserves.

BP's reserve replacement ratio, the percentage of production replaced by new discoveries, was 112 percent last year, the London- based company said today in an e-mailed statement. It also added about 2.4 billion new barrels to its non-proved resources, which now total 42.1 billion barrels of oil equivalent.

``The key thing is too look at the reserve replacement and that is broadly positive,'' said Alan Beaney, who helps manage $2.1 billion at Principal Investment Management in Sevenoaks, England.

BP will be ``able to sustain production of at least 4 million barrels a day until 2020 even with no new discoveries or access to new opportunities,'' Chief Executive Officer Tony Hayward said in the statement. ``We expect to do better than this.''

Hayward, in his first strategy presentation since succeeding John Browne in May, outlined the company's plans to meet production growth targets.

BP shares fell 5 pence, or 0.9 percent, to 561.5 pence in London. The stock has lost about 9 percent this year.

Hayward is trying to win back investor confidence after a fatal explosion at the Texas City refinery in 2005, startup delays at the Thunder Horse platform in the Gulf of Mexico and pipeline leaks at Alaska's Prudhoe Bay, the biggest oilfield in the U.S.

Production Promise

Earlier this month, BP pledged production will rise 13 percent during the next five years to about 4.3 million barrels of oil equivalent a day. Output fell 3 percent to 3.82 million barrels a day last year after the company sold assets and received less crude from production-sharing projects. It was the second annual drop after a decade of expansion.

The gap with rivals due to poor performance in BP's refining and marketing business was estimated at between $3.5 billion and $4 billion a year.

Plans are in place to reduce that shortfall by almost half by the end of next year, mainly through restoring and upgrading refineries, Iain Conn, head of BP's refining and marketing business, said in the statement.

BP has a ``very strong'' platform for expanding its refining and petrochemical business in China, Conn told investors in London today. The company plans to start works on the Whiting refinery upgrade in the U.S. state of Indiana this year, he said.

BP expects refining margins to average $7.50 a barrel in the next three or four years.

Alternative Energy

The company plans to invest $1.5 billion in alternative energy projects this year. That investment represents ``a front-end acceleration of its longer-term $8 billion plan to build a new business, based chiefly on solar, wind and biofuels,'' BP said. It estimates this business is already worth between $5 billion and $7 billion.

On Feb. 5, BP said net income gained 53 percent to $4.4 billion in the fourth quarter.

BP also said this month that it will spend $1 billion in 2008 to reorganize operations and cut 5,000 jobs by the middle of next year. Hayward is seeking to streamline the company's structure following $100 billion of acquisitions.

(BP will hold an online presentation starting at 2 p.m. London time. Click on http://www.bp.com/strategywebcast to register and listen.)

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

Last Updated: February 27, 2008 13:24 EST