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* After budget cuts, exploration strategy to be conservative
* Reserves healthy but projects pipeline relatively weak - analyst
By Ron Bousso and Dmitry Zhdannikov
LONDON, May 23 (Reuters) - The surprise departure of BP's exploration boss has turned the spotlight on an oil search strategy that, after years of spending cuts, is focusing mainly on expanding existing fields rather than venturing expensively into the unknown.
That caution reflects a firm chastened by the $55 billion cost of its 2010 Gulf of Mexico spill, and needing to squeeze every last drop out of a sharply reduced exploration budget at a time of low oil prices.
"Exploration doesn't necessarily have to look like (nature broadcaster) David Attenborough standing on a brand new frontier," a BP source told Reuters.
While BP's total reserves and fields coming onstream in the next four years look healthy compared to the other majors, its long-term project pipeline is the slimmest among its peers and its break-even costs are the highest, according to some analysts, among them Macquarie.
Several BP sources said Chief Executive Bob Dudley and his team were hammering out a new long-term strategy, with investors expecting an update on its post-2020 plans later this year or early next. The plan is likely to chime with a phrase that Dudley is fond of using: "Big is not necessarily beautiful."
After asset sales forced on it by the Gulf disaster shrank the company by a third, BP is today focusing its operations on five regions -- Angola, Azerbaijan, Egypt, the Gulf of Mexico and the North Sea.
It was in Angola, Egypt and the North Sea, already BP core regions, that Richard Herbert notched up his main successes during his two years as head of exploration.
SHRINKING BUDGET
BP said his departure followed its decision to bring exploration and field development under one upstream team, headed since February by Bernard Looney.
But Herbert, who worked with Dudley in Russia in the 2000s, had also seen his annual budget shrink from $3.5 billion in 2013 to $1 billion this year - not enough to drill even a dozen complex deep-water wells, and certainly not enough to throw at a frontier exploration with potential high gain, but also a high risk of coming out empty-handed. Royal Dutch/Shell
While BP's existing resources are not small compared to its peers, analysts say the lack of a long-term project pipeline is a worry.
BP's reserves-to-production ratio, the number of years reserves can sustain current production, is the third highest among oil majors at nearly 13 years, excluding output from Russia's Rosneft, in which BP has a near-20 percent stake. It trails only Exxon Mobil's
By 2020, the startup of projects such as the West Nile Delta in Egypt and the Clair Ridge field in the North Sea will have added 800,000 bpd of oil equivalent to its oil and gas output capacity, Dudley told Reuters last year.
In the short term, that appears to be comfortably enough to offset shrinking output from mature fields and maintain or increase a current output level of around 2 million bpd.
But another indicator, the reserves replacement ratio (RRR) - new proven but unexploited discoveries as a proportion of annual production - reveals a less rosy picture.
DISAPPOINTMENTS
BP's RRR fell last year to 61 percent, its lowest in many years, from 129 percent in 2013.
The RRR reflects not only a failure to unlock new deposits - a problem for all the multinationals - but also a reluctance to commit investment as oil prices languish about 60 percent below mid-2014 levels.
Among BP's rivals, Shell's RRR was negative last year, while that of Eni, fresh from discovering the giant Zohr field off Egypt, was 148 percent.
Some of the seemingly promising projects that Herbert inherited from his predecessor, Mike Daly, have proved disappointing.
In Brazil, a corruption investigation has slowed projects for other majors as well as BP. Turmoil in Libya has forced it to write off some investments there, while low oil prices have hurt development of the Canadian oil sands.
Australian authorities have also refused so far to allow BP to explore the Great Australian Bight, an untapped basin off the southern coast, amid environment protests.
BP has said it plans to make further acquisitions to build its resource base, such as the doubling of its stake in the North Sea Culzean field announced this week.
But Macquarie analyst Iain Reid said BP's pipeline of new projects, totalling 1.8 billion barrels of oil equivalent, was the lowest among the world's top five oil companies.
"BP has the lowest amount of pre-FID (final investment decision) resource, which leads to the weakest future growth rates," Reid said.
BP's project break-even costs are also the highest in the group at around $72 a barrel, according to Macquarie.
"BP's portfolio looks thin compared to peers, hence we continue to believe that it will need to acquire further resource to supplement the current project list and provide stronger growth at lower costs than its current portfolio."
(Editing by Kevin Liffey) ((Ron Bousso)(email: ron.bousso@thomsonreuters.com)(Tel.: +44)(0)(207 542 2161)(Reuters Messaging: ron.bousso.reuters.com@reuters.net))
