BP has set out a 10-year strategy to transform from an international oil company to an international energy company, as it looks to achieve net-zero emissions by 2050
The new strategy will reshape its business as it pivots from being an international oil company focused on producing resources to an integrated energy company focused on delivering solutions for customers.
Within 10 years, bp aims to have increased its annual low carbon investment 10-fold to around US$5bn a year, building out an integrated portfolio of low carbon technologies, including renewables, bioenergy and early positions in hydrogen and CCUS. By 2030, bp aims to have developed around 50GW of net renewable generating capacity – a 20-fold increase from 2019 – and to have doubled its consumer interactions to 20 million a day.
Over the same period, bp’s oil and gas production is expected to reduce by at least one million barrels of oil equivalent a day, or 40 per cent, from 2019 levels. Its remaining hydrocarbon portfolio is expected to be more cost and carbon resilient. bp intends to complete the ongoing wave of major projects, decreasing capital intensity, and to continue to high-grade the portfolio, resulting in significantly lower and more competitive production and refining throughput. The company will not seek to explore in countries where it does not already have upstream activities.
By 2030, bp aims for emissions from its operations and those associated with the carbon in its upstream oil and gas production to be lower by 30-35 per cent and 35-40 per cent respectively.
bp has also out a new financial frame to support a fundamental shift in how it allocates capital, towards low carbon and other energy transition activities.
“Energy markets are fundamentally changing, shifting towards low carbon, driven by societal expectations, technology and changes in consumer preferences. 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,” said Helge Lund, bp’s chairman.
“By following this strategy, we expect bp to be a very different energy company by 2030,” added Bernard Looney, the company’s CEO.
Will Scargill, managing Oil & Gas analyst at GlobalData, commented, “An overhaul of this scale will require significant movements in the M&A market, if it is to be delivered in the targeted timeframe.
“Among its growth plans for low-carbon energy sources, BP’s target for renewable power generation capacity is a big ask. To reach 20GW by 2025 and 50GW by 2030 will likely require significant acquisitions on top of the expansion of capital spending that BP has set out.
“In terms of its traditional oil and gas segment, BP will need to offload assets that are not high-grade to hit its targets of improving returns on capital from a reduced asset base. Assets most likely to be put on the market are legacy positions with little growth potential.”
Luke Parker, Wood Mackenzie vice-president - Corporate Analysis, said, “Today’s strategy update marked a big step forward, filling in many of the blanks, including detailed guidance to 2030. 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.
“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.”
