BP vows to cut fossil fuel production by 40% by 2030
BP has unveiled plans to transition away from being an oil company and to become an integrated energy company instead, headlined by a commitment to decrease fossil-based hydrocarbon production within a decade.
In a briefing sent to investors last month, BP said it was preparing to reduce the value of its fossil fuel assets by between $13bn (£10.4bn) and $17.5bn (£14bn) before mid-October, as a result of Covid-19’s impact on the sector. It then struck a $5bn deal to offload the majority of its petrochemicals business a year ahead of schedule.
Both moves were broadly interpreted as a precursor to a broader transition away from high-carbon, extractive business models and towards renewable energy, energy efficiency and other clean technologies. Indeed, BP’s chief executive Bernard Looney said the choices were “rooted in [BP’s] net-zero ambition and reaffirmed by the pandemic”.
Today (4 August), BP released a new company strategy which it claims will result in a “decade of delivery” against its 2050 net-zero target.
It includes a commitment to increase annual investment in low-carbon projects to $4bn by 2025 and $5bn by 2030 – up from around $0.5bn at present. Renewable electricity will receive the bulk of this funding, with BP aiming to have developed 50GW of renewable generation capacity within a decade. Smaller portions will be allocated to bioenergy, hydrogen, electric vehicle (EV) infrastructure and carbon capture, usage and storage (CCS). $4bn in 2025 will be equivalent to one-fifth of BP’s capital.
At the same time, BP will reduce its fossil-based hydrocarbon production by 40%. Assets remaining after this phase-out will be “more cost and carbon resilient” than their predecessors, the energy major said in a statement. Meeting the target will require BP to halt all oil and gas exploration initiative in countries where it is not yet operating.
By completing this phase-out and by making its remaining assets more efficient, BP will be able to cut its operational emissions by 30-35% within a decade and the emissions related with its upstream activities by 35-40% within the same timeframe.
Looney said that the new strategy provides a “comprehensive and coherent approach” to delivering against BP’s long-term climate goals.
“We are pivoting… from a company driven by the production of resources to one that that’s focused on delivering energy solutions for customers,” he said. Aside from customers, Looney emphasised the attractiveness of an integrated energy approach to investors – many of whom are facing calls to divest from high-carbon businesses and sectors.
BP has not yet disclosed the impact which its strategy will have on jobs. It is set to provide more information on this, plus how it intends to deliver against the targets, in a briefing to investors in September.
Greenpeace had previously criticised BP’s net-zero target for lacking detail and credibility. It has dubbed the new plans “a necessary and encouraging start”.
The group’s senior climate campaigner Mel Evans said: “BP has woken up to the immediate need to cut carbon emissions this decade. Slashing oil and gas production and investing in renewable energy is what Shell and the rest of the oil industry needs to do for the world to stand a chance of meeting our global climate targets.”
Recent research from think-tank Carbon Tracker concluded that oil and gas majors will collectively need to cut production by at least 35% by 2040 if the energy sector is to align with the Paris Agreement’s 2C trajectory.
BP’s new target clearly exceeds this requirement, but will not be enough as a standalone, Carbon Tracker’s founder Mark Campanale said.
“This decision to cut fossil fuel output is exactly what Carbon Tracker has been asking for, so this BP announcement is significant and we’re looking at the detail,” he said. “If all producers were to make similar cuts, might supply get back inside the carbon budget to be Paris aligned?”
Carbon Tracker recently accused many of the world’s largest oil and gas firms of greenwashing by publishing net-zero targets and backing them up with plans that would result in absolute emissions reductions as low as 3%.