BP walks the emissions talk with plan to slash oil production and boost renewable spend
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It has been in the works for some time and while COVID-19 and its impact on oil demand might have accelerated the process, energy giant BP has now outlined concrete plans to slash oil and gas production by 40 per cent and focus on clean energy.
The supermajor, which posted a record $US6.7bn ($9.3bn) loss in the second quarter and slashed its dividends by half, has unveiled plans for a 10-fold increase in annual low carbon investments to $US5bn by 2030.
This is aimed at delivering on its goal of achieving net zero emissions by 2050 and preparing for a world that could see fossil fuel demand drop by as much as 75 per cent over the next 30 years.
BP said in a statement that the coming decade was critical in the fight against climate change and that to drive the required change in global energy systems “will require action from everyone”.
It plans to make major investments into bioenergy, hydrogen, and carbon capture and storage.
Other investments include having up to 70,000 electric vehicle charging points, up from the current 7,500 points.
The company is looking to reduce its oil and gas refining portfolio from 1.7 million barrels per day in 2019 to about 1.2 million barrels per day in 2030 and raise $25bn by selling assets over the next five years.
Perhaps more tellingly, it has also flagged that it will not carry out any oil and gas exploration in new countries.
Wood Mackenzie believes that BP’s strategy update fills in many of the blanks about how it plans to achieve net zero emissions by 2050.
“It leaves stakeholders with a much clearer of idea of where BP is headed over the next decade, how it will to get there and what that means for the value proposition,” Luke Parker, Woodmac’s vice president of corporate analysis said.
“We said back in February that no company of BP’s stature had gone as far, or committed so unequivocally, to transforming itself in the face of the energy transition.
“The guidance that BP laid out today brings that transformation to life – makes it real. It constitutes the clearest and most detailed roadmap to big energy that any of the majors have provided to this point.”
Parker added that this was the perfect moment for BP to press the reset button.
“Several factors have converged to make it possible: coronavirus and everything that comes with it; a strategic pivot to net-zero on the horizon; Shell’s dividend reset; a new leadership with credit in the bank. Our view is that BP has taken the prudent course of action,” he said.
Even Greenpeace UK acknowledged that while BP had further to go, it had woken up to the immediate need to cut carbon emissions and had made a necessary and encouraging start.
BP’s move was well received by shareholders despite its record loss, with shares in the company closing up 6.5 per cent on Tuesday.
It also brings to question what steps other major oil and gas companies will take to achieve their emissions targets, at least for those who have announced them.
Shell has also committed to a net-zero emissions target for 2050, which includes the reduction of Scope 3, or indirect emissions, that occur in its value chain and account for 85 per cent of its total carbon footprint.
It noted that it plans to achieve this by emphasising gas over oil and expanding its already sizeable renewables business.
However, the company has yet to take the same steps its rival has already committed to.
Norwegian state-owned energy company Equinor has also announced that it plans to cut emissions in its home country by 40 per cent this decade and is also hedging its bets on carbon capture and storage technology.
Like Shell, it has not committed to the big changes that BP is taking, though it has set a goal of stopping routine flaring (of gas) in its operations by 2030 at the latest.
Italian major Eni, which committed to slashing its net emissions by 80 per cent by 2050, is the only other major company that has outlined an energy transition plan.
It signalled earlier this year that it would exit traditional oil refineries in the next decade and start winding down oil and gas production from 2025.