The inconvenient truth behind BP’s move on climate change

U.S. majors are largely sticking to their guns, investing little in renewable energy or other clean energy-related projects while maximizing profits from their legacy assets and showering cash on their shareholders through dividends and share buybacks.

There’s an obvious financial justification for BP scaling back its climate-related targets.


It’s not just the short-term opportunity to post record profits from strong oil prices and the big surge in gas prices that a combination of the pandemic-driven lack of investment in new production and then Russia’s invasion of Ukraine has created.

According to BP, it can generate a 15 to 20 percent return on investment on its fossil fuel projects. Bioenergy yields are around 15 percent, but only 6 to 8 percent for renewable energies like sun and wind. Within the new strategy and additional investment in non-fossil fuel projects lies a bias towards biofuels, EV charging and its convenience business.

But BP would argue there is also a social rationale for its revised plan.

The war in Ukraine, cutting access to Russian gas, which met 40 percent of Europe’s gas needs, and the embargoes imposed by Europe and the US on Russian oil presented a potential “lights out” moment for Europe and its governments .

They scrambled to secure alternative supplies, paid whatever it took to compete with traditional Asian buyers for LNG, reopened mothballed coal mines and expanded production from existing mines, restarted defunct nuclear plants, and bought oil from non- Russian producers.

The pace of renewable energy deployment has been impressive and will continue to be so, but it will be decades before there is material demand for fossil fuels.

Western governments – and that includes the Biden administration in the US – have also urged oil and gas companies to increase production.

As Looney himself said this week, when the conversation when BP made its original commitment to reduce its carbon emissions was almost entirely about clean energy, there is now a much greater emphasis on energy security and affordability.

If the transition to clean energy is to be smooth, investments will be needed in the current energy system, which is still mainly dependent on oil and gas.

This rather pragmatic perspective has a substantive logic. The world cannot move to net-zero carbon emissions immediately.

Secure energy supply

There needs to be a transition from a fossil fuel dominated energy sector to this clean new world, and that will of necessity continue to include oil and gas through 2050.

That in turn means existing producers will need to invest in maintaining adequate production for the next few decades if lights are to stay on, homes are to stay warm in winter and cool in summer, and industries are to keep operating.


The impact of the war in Ukraine on the energy sector in Europe, with global repercussions, is a reminder of how fragile and vulnerable the system is.

The pace of renewable energy deployment has been impressive and will continue to be so, but it will be decades before there is material demand for fossil fuels.

This means that if energy is to be both available and affordable, new investments in production will likely need to be made to keep supply running — a point of discussion in the debates surrounding the current energy market here, particularly the gas market.

BP’s plan is to focus on “short-term, fast payback” projects that it believes will be appropriate in a world that will reduce its use of fossil fuels to meet the 2050 target.

The cynics would say that the company’s arguments about safety and affordability are a cover for greed – that it doesn’t want to miss the opportunity for the unusually high profits of its North American peers and has given in to pressure from its own shareholders who compare to its investments in to deliver cleaner energy at far higher returns from its legacy business.

There is undoubtedly a strong element of truth in this view. BP is a commercial organization whose shareholders expect competitive returns.

The more pragmatic, however, would accept the other, perhaps uncomfortable, truth. The turmoil experienced in energy markets over the past year will require a response from oil and gas producers if the kind of chaos and crisis that has almost engulfed Europe over the past year is not to become an enduring and pervasive feature of the world in which we live life.

The Business Briefing newsletter delivers important stories, exclusive coverage and expert opinions. Sign up to receive it every weekday morning. The inconvenient truth behind BP’s move on climate change

Brian Lowry

InternetCloning is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – The content will be deleted within 24 hours.

Related Articles

Back to top button