BP moves from oil to ‘integrated energy’

A new strategy has been introduced by BP to reshape its business from an international oil company to an integrated energy company and reduce emissions.

Within 10 years, BP expects to have increased its annual low carbon investment 10-fold to around US$5 billion a year, building an integrated portfolio of low carbon technologies, including renewables, bioenergy and early positions in hydrogen and carbon capture utilisation and storage (CCUS).

By 2030, BP aims to have developed around 50GW of net renewable generating capacity – a 20-fold increase from 2019 – and to have doubled its consumer interactions to 20 million daily.

During the same period, BP’s oil and gas production is expected to reduce by at least a million barrels of oil equivalent a day, or 40%, from 2019 levels. Its remaining hydrocarbon portfolio is expected to be more cost and carbon resilient.

By 2030, BP also aims for emissions from its operations and those associated with the carbon in its upstream oil and gas production (addressed by Aim 1 and Aim 2 of BP’s net zero ambition) to be lower by 30-35% and 35-40% respectively.

BP has set out a new financial frame to support a fundamental shift in how it allocates capital towards low carbon and other energy transition activities.

It is partnering with 10-15 cities and three core industries in decarbonisation efforts and doubling customer interactions.

No exploration in new countries is planned either.

As part of its investor proposition, BP’s board has introduced a new distribution policy.

The dividend is reset to a resilient level of US5.25 cents per share per quarter, and intended to remain fixed at this level, subject to the board’s decision each quarter.

That’s supplemented by a commitment to return at least 60% of surplus cash to shareholders through share buybacks, once BP’s balance sheet has been deleveraged and subject to maintaining a strong investment grade credit rating.

“Energy markets are fundamentally changing, shifting towards low carbon, driven by societal expectations, technology and changes in consumer preferences,” chairman Helge Lund says.

“And in these transforming markets, BP can compete and create value, based on our skills, experience and relationships.

“We are confident that the decisions we have taken and the strategy we are setting out are right for BP, for our shareholders, and for wider society.”

Earlier this year BP announced its new purpose, net zero ambition and aims, and its determination to reimagine energy and reinvent BP. Building on the purpose, together with BP’s beliefs about the future of energy systems and changing customer demands, the strategy sets out how BP expects to deliver its ambition.

“From our Lightsource BP joint venture – now in 13 countries – to our electric vehicle charging partnership with DiDi in China, and our industry-leading convenience partnerships with M&S in the UK and REWE in Germany – we are already building scale and capability,” chief executive Bernard Looney says.

The strategy is built around three focus areas including low carbon electricity and energy (renewables), convenience and mobility, and resilient and focused hydrocarbons.

BP will give more detail on its strategy, business plans and investor proposition in its capital markets day presentations on September 14-16.