When it comes to the energy transition, BP just gets it. They get it.
Of course the world’s energy systems must entirely decarbonise, BP gets that. Transport, too. BP gets it. Bernard Looney, the new chief executive of a company named just last year as among the world’s 20 most polluting companies, gets it. Nick Boyle, chief executive of Lightsource BP, the solar developer the O&G giant owns half of, said on stage that “these guys just get it”. BP needs to change. It has to change. BP gets that.
Or maybe, just maybe, the Looney doth protest too much.
Looney took to the stage last Wednesday afternoon to champion BP’s newest climate pledge, a landmark move which has seen the company set itself the “ambition” of attaining net zero status by 2050, or earlier. That pledge is to cover all greenhouse gas emissions it is responsible for from both its own processes and products, on an absolute basis. Combined, it’s equivalent to around 415MteCO2 each year.
If its peers followed suit, Looney said, it would completely solve emissions from the energy sector by 2050.
But not only was BP’s pursuit of a net zero future “right for the world”, it presented a “tremendous business opportunity” for the company, Looney said, with trillions of dollars of investment required to re-plumb and re-wire the energy system as the transition accelerates.
Given the sheer wealth of the opportunity then, it is perhaps curious that BP would not afford the watching crowd much – if any – concrete information as to how it will actually achieve such a goal. The event got off to an inauspicious start when some of the Looney’s first words were “what I’m not going to talk about today is detail”, much to the chagrin of watching analysts and journalists alike.
That detail is to be forthcoming, distributed at a capital markets day in September. Having pledged to drastically reshape BP internally, dividing the business into four core units and appointing new leadership teams to them, it would be folly for the company to put a precise plan in place, leaving said new leadership team unable to contribute, Looney said. It’s not folly, of course, to announce said target with much fanfare and production value. But it did make for an excellent grandstanding welcome for the firm’s new chief executive, especially given a number of BP’s aforementioned peers have set similar targets in recent months.
Without any explicit detail to present, the discussion around BP’s net zero target was stymied and almost went around in circles. Investments in low carbon businesses – made out of a new low carbon business unit headed by Alternative Energies chief Dev Sanyal – do stand to increase, but Looney will set no “arbitrary” financial target. Investments will be made not just to help BP decarbonise, but also its customers.
“The ambition is not to spend money,” Looney said, indicating that BP will invest in businesses that will make a difference, that BP can scale, that it can add something to and – here’s the crux of the matter – will deliver competitive returns.
What was made abundantly clear, however, was that BP sees no end in sight to its core business. It wants to transform, but still perform while doing so, as Looney explained. “BP will be in the oil and gas business for a very long time. That’s a fact,” Looney said, presumably with at least one eye on the watching crowd of assembled shareholders. And Looney’s tune was seemingly the correct one to take given a lack real movement in the firm’s share price that afternoon.
This isn’t to say that BP’s commitment to a net zero future is entirely meaningless. O&G majors are now blinking en masse, mindful of the fact investors are turning away in their droves with the entire fossil fuel sector described as firmly within its “death phase”.
For more than 110 years BP has been turning oil into gold, that it now wants to turn it green – and is willing to rip up the energy major blueprint to do so – has to be lauded. But without any concerted detail, BP’s “ambition” for net zero cannot be judged on its merit. Climate targets will not be reached by targets or aims, but by action. BP can insist that the company “gets it”, and there are now positive signs that it does. But without any clear plan, it’s difficult to determine what, exactly, ‘it’ is.