London-based BP, one of the world’s largest oil and gas super-majors, has left its traditional industry reeling after announcing a mammoth strategy to transition the company into “an integrated energy company” with plans to increase low-carbon investment 10-fold and build out a 50GW renewable generating capacity by 2030.
BP, founded in 1909 and once known as The British Petroleum Company, has long been one of the world’s seven oil and gas super majors and the target of much criticism for its role in contributing to the world’s carbon emissions problems.
Of late it has been showing signs it is serious of moving beyond, or even delivering on its decade-ago “beyond petroleum” marketing campaign (which was little more than marketing), and increasing efforts towards a demonstrable transition to a net zero future, which it has already committed to reach by 2050 or sooner.
This week, BP unveiled its new strategy which focuses on the heavy build out on renewables and a focus on electric vehicles. According to Valentina Kretzschmar, Vice President of analysts Wood Mackenzie, it’s a strategy that far outpaces any of its peers.
“BP has been an international oil company for over a century – defined by two core commodities produced by two core businesses,” said Helge Lund, BP’s Chairman. “Now we are pivoting to become an integrated energy company – from IOC to IEC. From a company driven by the production of resources to one that that’s focused on delivering energy solutions for customers.”
“Energy markets are fundamentally changing, shifting towards low carbon, driven by societal expectations, technology and changes in consumer preferences. And in these transforming markets, bp can compete and create value, based on our skills, experience and relationships,” he said.
“We are confident that the decisions we have taken and the strategy we are setting out today are right for bp, for our shareholders, and for wider society.”
BP’s new strategy includes wide ranging efforts to reshape itself as a future net zero integrated energy company, starting with pivoting to low carbon energy by increasing its investments in low carbon 10-fold by 2030 – to around $US5 billion a year – with an up to 8-fold increase by 2025.
BP will also look to transition to a more customer focused approach and will partner with 10 to 15 cities and 3 core industries in decarbonisation efforts while doubling customer interactions to 20 million per day by 2030.
The company will also seek to reduce emissions from operations by 30-35% by 2030, emissions associated with carbon in upstream oil and gas production by 35-40% by 2030, and carbon intensity of BP products by 15% by 2030.
BP is also seeking to build out an integrated portfolio of low carbon technologies including everything from renewables to bioenergy as well as early positions in hydrogen and CCUS (carbon capture, utilisation, and storage).
By 2030 BP expects its oil and gas production to have declined by at least one million barrels of oil equivalent a day, around 40% on 2019 levels. Hidden within the company’s large press release was a neat little commitment to increase the number of its electric vehicle charging points from 7,500 to over 70,000, which will build on existing partnerships and work already done, specifically in China.
“We bring with us over 100 years of experience steeped in the world of energy,” added Bernard Looney, chief executive officer. “We understand energy markets deeply, and have developed unique capabilities in trading, marketing, technology and innovation.
“And we are not starting from scratch in this new world. From our Lightsource bp joint venture – now in 13 countries – to our electric vehicle charging partnership with DiDi in China, and our industry-leading convenience partnerships with M&S in the UK and REWE in Germany – we are already building scale and capability.”
Unsurprisingly, BP’s announcement and the scale of its commitment was immediately praised by a number of groups.
“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,” said Luke Parker, Wood Mackenzie Vice President – Corporate Analysis.
“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.
“BP’s oil and gas business will shrink dramatically, while the low carbon business will grow strongly,” adding that, “if ever there was a moment to reset, this was it. 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.”
“BP has radically changed the game,” said Andrew Grant, Carbon Tracker’s Head of Oil, Gas and Mining. “In the arms race of emissions announcements, most oil and gas peers have conveniently ignored the global need to produce and use less oil and gas – BP’s production cut of 40% by 2030 makes them unquestionably the industry leader.”
“In addition to announcing its financial results, BP also announced specifics that are aimed at putting it on the pathway to reach the commitment, made in February, of net zero emissions by 2050,” explained Peter Kiernan, Lead Analyst, Energy, at The Economist Intelligence Unit.
“It is significant that BP has announced targets to be reached by 2030 as part of this long term strategy, which include massively boosting spending in low carbon energy, increase its renewables capacity to 50 GW, and cut its oil and gas output by 40%.
“Other oil and gas companies have also recently made commitments to varying degrees to cut emissions, but this announcement by BP is a significant step in terms of committing the business to a lower carbon energy future.
It is also unlikely to be the last. If anything, the impact of the coronavirus pandemic will sharpen the focus of operators on the future of fossil fuel demand, while likely enhancing the attractiveness of investing in lower carbon sources of energy over the longer term.”
Of course, there are those with specific hopes for BP’s announcement who are calling on BP to do more by specifically attending to their specific hopes.
Maggie Wood, a spokesperson for the Conservation Council of Western Australia, rightly concluded that BP’s 40% reduction in oil and gas production “must include” its withdrawal from WoodSide Energy’s natural gas Burrup Hub.
“Over its planned 50-year lifetime, the Burrup Hub will produce more than six billion tonnes of carbon pollution from gas production, export and combustion overseas,” she said. That is the equivalent of 11 years of total current carbon emissions from Australia.
Wood said that Helge Lund’s comment that the company’s new strategy “simply recognises a stark truth” hits the nail on the head: “Lund is right – the world is on an ‘unsustainable path’. When he says the planet’s ‘carbon budget is running out’, he must recognise that the Burrup Hub would take a huge bite out of that dwindling budget.”