BP will increase its low-carbon spending to $5 billion a year by 2030 and boost its renewable power generation to 50 gigawatts (GW) while shrinking oil and gas output by 40% compared with 2019, it said on Tuesday, Reuters reported.
The portfolio it plans to build would include renewables, bioenergy and early positions in hydrogen and carbon capture and storage technology, with the bulk of the budget to be spent by 2025.
BP’s oil and gas production is expected to shrink by at least one million barrels of oil equivalent a day from 2019 levels, the company said, adding that it would cease exploring for oil and gas in new countries.
“BP today introduces a new strategy that will reshape its business as it pivots from being an international oil company focused on producing resources to an integrated energy company focused on delivering solutions for customers,” it said.
The company said it stood by its ownership of a 19.75 percent stake in Russia’s Rosneft.
BP had been due to publish a strategy update in September, but disclosed some details on Tuesday, when it posted second-quarter results and announced it would halve its quarterly dividend.
The company’s first dividend cut in a decade follows a record $6.7 billion quarterly loss after the coronavirus crisis took a heavy toll on global energy demand.
Speaking after BP's Q2 earnings announcement, Luke Parker, Wood Mackenzie Vice President - Corporate Analysis, said:
"Today’s strategy update marked a big step forward, filling in many of the blanks, including detailed guidance to 2030. It leaves stakeholders with a much clearer of idea of where BP is headed over the next decade, how it will to get there and what that means for the value proposition.
"We said back in February that no company of BP’s stature had gone as far, or committed so unequivocally, to transforming itself in the face of the energy transition. The guidance that BP laid out today brings that transformation to life – makes it real. It constitutes the clearest and most detailed roadmap to Big Energy that any of the Majors have provided to this point.
"BP's oil and gas business will shrink dramatically, while the low carbon business will grow strongly.
"Oil and gas production is expected to fall by 40% by 2030, from 2.6 million boe/d in 2019 to 1.5 million boe/d. Refining throughput is expected to fall from 1.7 million b/d in 2019 to around 1.2 million b/d in 2030. BP will not be exploring in any new countries. High-grading will be a big driver: BP’s new disposal programme is targeting US$25 billion of proceeds from H2 2020 to end 2025.
"BP is guiding for a 10-fold increase in investment in low carbon energy and technologies (power, bio-energy, CCUS, hydrogen) by 2030, to around US$5 billion per year. Within that, the company will deliver a 20-fold increase in developed renewables capacity, from to 50 GW (through both organic and inorganic investment).
"The convenience and mobility part of the business is the other big area. This segment offers the most attractive returns in BP’s portfolio and BP is aiming to double its customer touch points by 2030 to 20 million. More marketing, more retail, more exposure to growth markets.
"The dividend cut will dominate the headlines. By its own Q1 reasoning, BP didn’t need to cut. Disposals have materially de-risked the financial outlook over the past few months – BP had done enough to cover an US$8 billion dividend pay-out in 2020 and 2021 at US$40/bbl Brent.
“But if ever there was a moment to reset, this was it. Several factors have converged to make it possible: coronavirus and everything that comes with it; a strategic pivot to net-zero on the horizon; Shell’s dividend reset; a new leadership with credit in the bank. Our view is that BP has taken the prudent course of action."
