BP Declares 40% Production Cut by 2030, Boosts Renewables, After Pandemic Delivers Big Quarterly Loss
London, UK-based BP says it will reduce its fossil fuel output 40% by 2030 and scale back its dividend to shareholders for the first time since the Deepwater Horizon oil rig disaster in 2010, as the world’s fourth most colossal fossil responds to mounting calls for climate action, the economic chaos wrought by the coronavirus pandemic, and a US$6.7-billion quarterly loss.
CEO Bernard Looney called the plan “a comprehensive and coherent approach to turn our net zero ambition into action.” The announcement came just a few weeks after BP sent shockwaves through the fossil industry by declaring $17.5 billion in stranded assets, scaling back its estimate of future oil and gas prices, and projecting that the coronavirus pandemic will produce a permanent drop in fossil demand, while accelerating the shift to carbon-free energy.
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Yesterday’s news drew conditional but unmistakeable praise from campaign organizations that have been pushing and prodding the fossil industry in this direction for decades.
“Whatever the devils that will no doubt emerge in the detail, this is a pretty big change from BP,” tweeted Greenpeace UK Chief Scientist Doug Parr.
“Today’s announcement is an important signal to the rest of the industry that the only credible way to cut pollution is to cut fossil fuel production,” said Kelly Trout, senior research analyst at Oil Change International. “Vague promises of ambition by 2050 are meaningless without clear details on the actions oil majors will take to manage a rapid decline in extraction within this decade, the critical time frame for staying within 1.5°C of warming.”
“Big Oil’s generous dividends have long been its main attraction to shareholders, and the move—hastened by the virus but made inevitable by the transition to cleaner energy—redraws the company’s investment profile,” Bloomberg News adds.
BP’s plan will reduce its oil and gas production by the equivalent a million barrels per day from 2019 levels, and the company will also “cease exploring for oil and gas in new countries,” Reuters says. It will increase low-carbon spending to $5 billion per year by 2030 and increase its renewable electricity generation to 50 gigawatts, from just 2.5 GW today, building a portfolio that includes renewable energy, bioenergy, and “early positions in hydrogen and carbon capture and storage technology, with the bulk of the budget to be spent by 2025,” the news agency adds.
BP will still complete “the ongoing wave of major projects” in fossil fuels, Oil Change International says. The $5-billion annual renewables commitment, up from $500 million in 2019, comes from a company whose annual revenue hit $303.7 billion in 2018. And “by excluding its share of Rosneft from its commitment to decline production, BP is omitting close to 30% of the carbon pollution associated with its extraction investments in 2019,” Oil Change notes.
BP holds 19.5% of Rosneft, the Russian fossil supermajor, Reuters says.
Overall, the company plans to reduce emissions from its operations 30 to 35%, cut its carbon output from oil and gas production 35 to 40% by 2030, reduce refining throughput from 1.7 to 1.2 million barrels per day, and increase its network of electric vehicle charging points from 7,500 to more than 70,000, Bloomberg writes.
While the announcement shows the company beginning to heed the call to #KeepItInTheGround, “the fact that BP’s new commitment represents a major step up in ambition compared to other oil and gas majors only underscores how far behind the entire sector is in acknowledging climate reality. BP has changed the game, but in a league with zero climate credibility,” Trout said.
Now, she added, “BP must take responsibility for Rosneft, for all of the carbon it invests in extracting, to legitimately claim to achieve a 40% reduction by 2030. BP must also stop investing in any new oil and gas, whilst ensuring a just transition for its workers and the communities affected by its polluting projects.”
Bloomberg says BP CEO Looney “is taking the opportunity presented by the virus to speed up the changes he needs to make to fulfill his vision of a low-carbon future. But the company went into the crisis with high debt and hefty payouts—it even increased the dividend for the fourth quarter—meaning more pain now.” But investors were apparently poised for this week’s dividend cut—the news agency says BP’s share value rose by up to 8.3% yesterday.
“This strategic shift is encouraging—much more clarity, apparently not sacrificing returns,” wrote Stuart Joyner, an oil and gas analyst at Redburn (Europe) Ltd. who previously warned investors against buying shares in Big Oil. “Rather, accelerating uncertainty means the sector’s cost of capital will rise further, perpetuating the derating,” he said in September 2019.
Now, he said in an investment note this week, BP is “making proper progress towards pleasing ESG investors” as the “journey unfolds towards a higher-rated, lower-geared company.”