Earlier in February this year BP, Britain’s biggest oil company announced that it aims to deliver net zero emissions across its operations and its oil and gas production by 2050 or sooner making it the latest major oil company to do so.
BP’s new CEO Bernard Looney revealed the new targets which were the highlight of a 10-point plan which also included pledges to halve the carbon intensity of the products they sell by 2050 or sooner, install methane measurement at all of the company's major oil and gas processing sites by 2023, to reduce methane intensity of operations by 50 percent, and increase the proportion of investment into non-oil and gas businesses "over time."
BP is promising big changes. The company said it planned to play a more proactive role in helping the world to get to net zero. In order to achieve this they pledged to actively support policies that advocate net zero; to further encourage their workforce to deliver on its net zero goals; to set “new expectations” in their relationships with trade associations; to make sure that they are recognised as a leader for transparency of reporting to include supporting the recommendations of the taskforce for Climate-related Financial Disclosures (TCFD); and to launch a new team to help countries, cities and large companies decarbonize.
Bernard looney has been subjected to intense campaigning and protests from environmental campaigners since taking up the role of CEO in early February. While announcing the new plan he stated that the company will be fundamentally transformed in pursuit of net zero emissions.
He said:
"The world's carbon budget is finite and running out fast; we need a rapid transition to net zero. We all want energy that is reliable and affordable, but that is no longer enough. It must also be cleaner. To deliver that, trillions of dollars will need to be invested in replumbing and rewiring the world's energy system. It will require nothing short of reimagining energy as we know it. This will certainly be a challenge, but also a tremendous opportunity. It is clear to me, and to our stakeholders, that for BP to play our part and serve our purpose, we have to change. And we want to change — this is the right thing for the world and for BP."
Helge Lund, BP's chairman, is very much in agreement with these comments and the path Bernard Looney wants to take to help the UK reach its net zero target in 2050. He said that the entire board was committed to driving the net zero transition.
He said:
"Energy markets are changing, driven by climate change, technology and societal expectations, and the Board supports Bernard and his new leadership team's ambition for BP. Aiming for net zero is not only the right thing for BP, it is the right thing for our shareholders and for society more broadly."
Environmental campaigners do not believe this move by BP is enough. Campaigners argue that BP remain committed to increasing fossil fuel production by around a fifth through to 2030 which means that despite the new pledges made BP is still a long way off from being in line with the goals of the Paris agreement. Critics would like to see the new strategy providing more detail and more definite targets that explain how they intend to deliver net zero emissions.
Charlie Kronick, oil adviser from Greenpeace UK has a lot of questions for BP:
"How will they reach net zero? Will it be through offsetting? When will they stop wasting billions on drilling for new oil and gas we can't burn? What is the scale and schedule for the renewables investment they barely mention? And what are they going to do this decade, when the battle to protect our climate will be won or lost."
Similarly, Ellen Gibson, U.K. campaigner at divestment organization 350.org, felt that BP's announcement was nothing more than "PR spin."
She said:
"BP is one of the companies most responsible for the climate emergency. They say they want their business model to align with the Paris Agreement, but simply put: It is not possible to keep to a 2-degree Celsius warming limit — let alone 1.5 C — while continuing to dig up and burn fossil fuels. Unless BP commits clearly to stop searching for more oil and gas, and to keep their existing reserves in the ground, we shouldn't take a word of their PR spin seriously."
BP responded saying that its net zero goal for its operations and production would be equal to a reduction in emissions of around 415 million metric tons of CO2 equivalent a year.
Looney said:
"This is what we mean by making BP net zero. It directly addresses all the carbon we get out of the ground as well as all the greenhouse gases we emit from our operations. These will be absolute reductions, which is what the world needs. If this were to happen to every barrel of oil and gas produced, the emissions problem for our sector would be solved. But of course, the world is not that simple; the whole energy system has to be transformed and everyone has a contribution to make — producers and sellers of energy, policy makers and everyone who uses energy."
Despite saying this, he still stressed that the company would not drastically sever its ties with the current oil and gas focused operating model, insisting that it would continue to concentrate on generating the revenue that would be required to help fund the transition.
He said:
"BP needs to continue to perform as we transform. As committed as I am to making transformation happen, I am equally committed to some fundamental principles that have served us well. Safe and reliable operations will always underpin all we do, and we remain committed to meeting the promises we have made to our shareholders. We can only reimagine energy if we are financially strong, able to pay the dividend our owners depend on and to generate the cash to invest in new low and no-carbon businesses We expect to invest more in low carbon businesses and less in oil and gas over time. The goal is to invest wisely, into businesses where we can add value, develop at scale and deliver competitive returns."
BP, in order to better support these new wide-ranging plans has conducted a major managerial reorganization, dividing the company into 4 business groups, Production and Operations, Customers and Products, Gas and Low Carbon Energy, and Innovation and Engineering. These groups will be complemented by three integrator divisions titled, Strategy and Sustainability, Regions, Cities and Solutions, and Trading and Shipping.
Environmental campaigners and green investors have welcomed this revamp very cautiously remembering that BP has not always delivered on its promises. BP has previously promised to move “Beyond Petroleum” only to sell off many of its clean technology divisions and refocus on fossil fuels.
However, BPs latest announcement does appear to be part of a trend that has seen a distinct difference emerging between European oil majors and many of their peers around the world.
Shell, Total and BP have all invested serious amounts of money in a whole range of clean tech companies over the past 5 years. At the same time, according to a recent report by the influential Carbon Tracker think tank, analysis of the world's remaining carbon budget shows that there are significant differences in the level of disruption oil majors face.
To clarify this, the think tank found that though none of the leading oil and gas companies are on track to be aligned with the Paris Agreement by 2040, Shell and BP's production levels would only need to reduce by 10 percent and 25 percent, respectively, while ConocoPhillips would face an 85 percent cut and ExxonMobil would require production cuts of 55 percent.
Carbon Trackers head of oil, gas and mining, Andrew Grant, welcomed BP’s new goal and described it as “a big step forward”.
He said:
"Last year BP supported a shareholder resolution to describe how its strategy is consistent with the goals of the Paris Agreement, including 'consistency of each new material capex investment. In our research we have pointed out the need for oil and gas producers to reduce emissions and production in absolute terms in order to fit within climate constraints, and crucially to make sure that they only invest in the lowest cost assets in order the mitigate the financial risk of them being stranded in the energy transition. BP's recognition of the finite emissions limits imposed on our planet is a big step forward. We look forward to understanding in greater detail how the company will achieve its targets."
Stephanie Pfeifer, member of the global Climate Action 100+ Steering Committee and CEO at the Institutional Investors Group on Climate Change (IIGCC), argued that investor pressure on oil majors would continue to intensify.
She said:
"This is a very welcome announcement from BP's new CEO. We need to see a wholesale shift to a net zero economy by 2050. This must include oil and gas companies if we are to have any chance of successfully tackling the climate crisis. Building on the positive engagement with BP through Climate Action 100+, investors will continue to look for progress from the company in addressing climate change. This includes how it will invest more in non-oil and gas businesses, and ensuring its lobbying activity supports delivery of the Paris Agreement."
It is clear that BP’s announcement has been largely welcomed by everyone. Reaching the net zero target is certainly not going to happen overnight but is the transition going to happen fast enough. We have to ask ourselves whether we can afford the luxury of time at this point.
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