On 12 February 2020, BP’s new CEO, Bernard Looney, announced the company’s new ambition – to become a net-zero company by 2050 or sooner, and help the world get to net-zero.
Mr Looney said the world’s carbon budget is finite and running out fast; which is why a rapid transition to net-zero is needed.
“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.”
He recognised that this will be a challenge, but said it is 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,” Mr Looney said.
BP’s new ambition to be a net-zero company by 2050 or sooner covers the greenhouse gas emissions from its operations worldwide, currently around 55 million tonnes of CO2 equivalent (MteCO2e) a year, and the carbon in the oil and gas that it produces, equivalent currently to around 360 MteCO2e emissions a year – both on an absolute basis.
Taken together, delivery of these aims would equate to a reduction in emissions to net-zero from what is currently around 415 MteCO2e a year.
“This is what we mean by making BP net-zero,” said Mr Looney.
“It directly addresses all the carbon we get out of the ground as well as all the greenhouse gases we emit from our operations.”
He said these would 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, policymakers and everyone who uses energy.”
That’s why the BP aims to help its customers reduce their emissions by halving the carbon intensity of the products it sells, again by 2050 or sooner – offering customers more and better choices of low- and no-carbon products.
BP aims to install methane measurement at all of its existing major oil and gas processing sites by 2023 and then reduce the methane intensity of its operations by 50 per cent.
Over time, BP also aims to increase the proportion of investment it makes into non-oil and gas 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,” Mr Looney detailed.
Furthermore, the ambition includes a series of aims targeted at supporting the world’s progress towards net zero:
- More actively advocating for policies that support net-zero, including carbon pricing; stopping corporate reputation advertising and redirecting resources to promote net-zero policies, ideas, actions, collaborations and its own net-zero ambition.
- Incentivising BP’s global workforce to deliver on aims and mobilise them to become advocates for net-zero; increasing the percentage of remuneration linked to emissions reductions.
- Setting new expectations for BP’s relationships with trade associations, making the case for BP’s views on climate change, being transparent where views differ, and being prepared to leave those where alignment cannot be reached.
- Being recognised as an industry leader for the transparency of reporting, working constructively with the TCFD and other groups to develop good practices and standards for transparency of reporting.
- Launching a new team to create integrated clean energy and mobility solutions and to help countries, cities and corporations around the world decarbonise.
The structure of BP’s organisation – and of much of the industry – has been broadly the same for more than a century, split into separate organisations – upstream, downstream, and other businesses.
To deliver its new ambition and aims, BP will now undergo a fundamental reorganisation.
“We need to reinvent BP. Our historic structure has served us well but, in order to keep up with rapidly-evolving customer demands and society’s expectations, we need to become more integrated and more focused. So we are undertaking a major reorganisation, introducing a new structure, a new leadership team and new ways of working for all of us,” said Mr Looney.
Under the plans, BP’s existing, largely autonomous business segments – upstream and downstream – will be dismantled and the group reorganised globally into a more focused and more integrated entity, comprising 11 teams.
The heads of these teams will make up BP’s new leadership team.
Performance and value growth will be delivered by four business groups: Production & Operations; Customers & Products; Gas & Low Carbon Energy; and Innovation & Engineering.
Three integrators will be established to find and maximise opportunities for BP: Sustainability & Strategy; Regions, Cities & Solutions; and Trading & Shipping.
Four teams will serve as enablers of business delivery: Finance; Legal; People & Culture; and Communications & Advocacy.
Performing while transforming
Despite the planned group-wide programme of change, BP’s fundamental commitments remain unchanged – to safety and to investors.
“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,” the CEO maintained.
“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.”
Vice President of Corporate Analysis at Wood Mackenzie, Luke Parker, said the announcement marks a major turnaround in BP’s position.
“Just 12 months ago former CEO Bob Dudley said the company could not be held accountable for how people use its products. Looney is taking the company in a very different direction,” he said.
“It’s an ambition, rather than a target, but the commitment appears to be unconditional. In terms of scale of commitment, this puts BP towards the top of the pack, along with Repsol and Equinor.”
“This will see BP’s business completely transformed over the coming decades: renewables and carbon abatement will get very big, legacy oil and gas will eventually get smaller,” Mr Parker said. “But the transition to 2050 is a multi-decade transition – not something that will happen in the next year or so.”
BP intends to host a capital markets day in September at which the leadership team will set out more information on BP’s strategy and near-term plans.