There’s no hiding that this is a major backflip
History books will be written about corporate mistakes.
Twenty years ago BP called itself “Beyond Petroleum” and by 2020 the company was hellbent on getting there. They pledged to reduce their own oil production by 40% by 2030, and promised to pivot into renewable power. The media was thrilled — “BP Shuns Fossil Fuels“, said Politico, and shines a light on “stranded oil and gas”. Only two years ago BP talked of “accelerating” it’s green investments. Then the price of oil and gas exploded and problems with unreliable energy started breeding.
Now BP is writing off a billion dollars in offshore wind investment, and the new CEO is calling for “pragmatism”. The company has flipped from cutting oil production 40% by 2030 to increasing it instead.
The new chief, Murray Achincloss said they still want to be “an integrated energy company” (presumably so it looks less like a full-reverse and more like a “tweak”), but he betrayed himself when he said: “we see growing demand for energy right now across the globe”. “It is not slowing down.” When he says energy, he means oil and gas.
BP to Increase Oil Output, New Chief Says
By Stanley Reed, New York Times
BP has a plan to become what Mr. Auchincloss called an integrated energy company. But in the meantime, “we see growing demand for energy right now across the globe,” he said. “It is not slowing down.”
He just wants to make oil and gas cheaper for us, really…
BP is “going to invest in today’s energy system, to help make sure that prices don’t get out of control,” Mr. Auchincloss said. “So that’s investing into oil and gas,” he added, while also putting money into alternative energy sources like biofuels and hydrogen.
But all those promises to cut oil production by 40% are gone with the wind:
…the company’s mainstay oil and gas production rose 2.6 percent last year. Supplies of liquefied natural gas — a chilled, compressed fuel transported by ships — rose by more than 20 percent.
Mr. Auchincloss said that oil output would continue to rise 2 percent to 3 percent a year through 2027 because of production increases in Abu Dhabi, Angola, the United States and elsewhere.
Chasing green rainbows has been an expensive mistake:
BP backs away from US offshore windpower
By Benjamin Storrow, E&E News
Call it a $1 billion mistake.
BP said Tuesday it wrote down the value of its U.S. offshore wind business by $1.1 billion last year, cementing a strategic shift for the British petroleum giant as it increases oil and gas production while recalibrating its efforts to generate clean electricity from ocean turbines.
It’s partnership with Equinor, meanwhile, increasingly looked like an albatross, with one company executive calling the U.S. offshore wind market “fundamentally broken.
BP’s shares have flatlined, while Exxons have grown 40%
Auchincloss can no doubt be only too aware of BP’s lagging share price relative to its rivals in recent years, which many blame on the company’s green agenda. BP’s shares are trading broadly in line with pre-pandemic levels, but by contrast ExxonMobil’s share price has surged by about 40% over the period. – – BP’s green agenda all at sea, Jillian Ambrose, The Guardian.
Finally shareholders demand profits and sensible plans
One shareholder of BP turned activist last October and wrote an extraordinary letter to the company to pressure it to drop the “irrational” net zero target and even to sack a board member with links to BlackRock.
Bluebell Capital is a hedge fund in London and it had some remarkable requests:
BP attacked by investor over ‘irrational’ switch to clean energy
Matt Oliver, The Telegraph
In a 30-page letter, Bluebell called on BP to scrap its commitment to scale back its oil and gas business by a quarter this decade, halt investment in renewable energy schemes and rewrite its net zero targets to clarify they will be achieved “in line with society”.
Bluebell argued that the targets will artificially constrain BP and leave it at a disadvantage compared to rivals such as Shell and ExxonMobil…
The activist is also demanding that BP returns an extra $16bn (£12.6bn) to shareholders this decade, and urged the oil giant to sack a board director with links to fund giant Blackrock, which it branded “a world champion of ESG inconsistency and hypocrisy”.
As Bluebell so aptly remarked:
“And in the short term, don’t cut your own production, because you are just doing a favour to the other [oil] companies.”
Bluebell Capital appear to have invested in BP because it was “undervalued” and were betting on a plan that the company could be turned around. They argued that BP would have been worth 50% more on the sharemarket but for this “ill conceived strategy” and scathingly pointed out that BP should keep out of renewable projects where it has little specialist expertise.
In the long run the CEO doesn’t see windmills, he see gas and more gas
It’s surely no coincidence that the new CEO made this statement just a month ago:
AI will trigger global surge in gas demand, says BP boss
Johnathon Leake, The Telegraph
Boom in tools such as ChatGPT means data centres require more power
Mr Auchincloss said: “Gas production will probably go a little bit lower this decade and then will grow significantly as we move into the following decades… Generative AI is something that’s creating an even higher level of demand for electricity.”
The amount of energy consumed by the 8,000 data centres globally is predicted to soar by 73pc to 800 terawatt hours (TWh) by 2026, according to the International Energy Agency.
By comparison, the UK consumes 321 terawatt hours of electricity a year.
According to research by data experts Digiconomist, in order to move its entire search engine operations to AI, Google would need as much electricity to power a country the size of Ireland.
Right now BP is acting as though it has swung right back to being an oil company, but it’s still saying the recent set backs are just a delay. But any company doing a complete reversal would say that, wouldn’t they?
A year ago we saw a dramatic shift in language across the company –– talking about their disappointment with renewables, and their shift back to oil and gas. So they were already starting the backflip then, perhaps the Bluebell plan was to wait for the right moment to tighten the screws?
Photo by Keith Edkins |
