BP: Net Zero Strategy Set for Success
With operations in Europe, North and South America, Australasia, Asia and Africa bp delivers heat, light and mobility to customers all over the world. Strong recent results in an improving post-Covid environment alongside astute acquisitions and partnerships are realising bp’s ambitious net zero targets and seminal transition to an Integrated Energy Company.
A story which began in 1908 with the discovery of oil in Persia, bp’s has always been about transitions – “from coal to oil, from oil to gas, from onshore to deep water, and now onwards towards a new mix of energy sources as the world moves into a lower carbon future.”
The crux of the next phase upon which bp will embark is the ambition to become a net zero company by 2050, or sooner, and to help the world as a whole achieve the same. “Our strategy will reshape our business as we decarbonise and diversify into different forms of energy, such as renewables, biofuels and hydrogen.
“Oil and gas will get smaller over time but will remain an important part of bp.” Steeped in 100 years of experience and knowledge at the heart of the world of energy, bp’s trailblazing new strategy will see it become a fundamentally different company in the next decade and beyond.
NET ZERO AMBITION
“We aim to be a very different kind of energy company by 2030 as we scale up investment in low carbon, focus our oil and gas production and make headway on reducing emissions,” bp summates, and five aims underpin the strategy. Chief among these is to achieve net zero across the entirety of its operations on an absolute basis, by 2050 or sooner, as well as across the carbon in upstream oil and gas production.
Bp will also halve the carbon intensity of the products it sells by the middle of the century. Largely harnessing portfolio management, including divestments and decarbonisation, bp will curtail the CO2 emissions produced per kilowatt hour of electricity consumed and improve carbon intensity of by providing products with lower life cycle emissions.
The installation of methane measurement at all existing major oil and gas processing sites by 2023 will then drive a 50% reduction in the methane intensity of bp’s operations, and in turn spur all bp’s joint ventures to set methane intensity targets themselves of 0.2% by 2025. “We are also investing in technology to reduce methane and improve our ability to measure it,” bp adds.
“The deployment of new measurement technology represents a major step-change in our industry’s approach to detecting, quantifying and reducing methane emissions.”
This all hinges on the fifth target – to increase the proportion of investment made into non-oil and gas businesses. “We’ve already started the switch towards clean energies,” the company stresses. “We made low carbon investments totalling $750 million in 2020 and more than $500 million in 2019, with new projects agreed coming onstream.”
This investment is targeted toward low carbon electricity generated from low carbon energy sources – including wind and solar, bioenergy and hydrogen and carbon capture (CCUS). According to Bernard Looney, CEO: “The direction is set. We are heading for net zero. There is no turning back. The world’s carbon budget is finite and running out fast; we need a rapid transition.”
OPEN ENERGI ACQUISITION
Established in 2018, bp Launchpad’s team of in-house business builders turns breakthrough technologies and digitally-led business models into high potential businesses, to help re-imagine energy for people and the planet. bp Launchpad has to date invested in the likes of Finite Carbon, Onyx Insight and Fotech Solutions, and these have just been joined by a sixth, in the form of UK-based digital energy optimisation business Open Energi.
Open Energi’s technology optimises the energy use of low-carbon assets, from battery storage to hydrogen electrolysers and solar farms, helping to create cost saving and giving traders access to real-time data. Over the past decade Open Energi has developed into a prominent energy technology company, whose products and services are used to optimise the performance of a network of energy assets with a total capacity of over 80MW.
“Open Energi’s technology helps manage the intermittency of increasing global renewable capacity, creating both energy saving and revenue opportunities,” expounded Sam Skerry, Senior Vice President bp Launchpad and Ventures. “The acquisition will help bp develop digitally-driven integrated energy systems and deliver innovative, efficient and flexible energy solutions for customers.
“As the world’s renewables capacity continues to grow, we’re excited to work with Open Energi to help optimise the cost of energy and the performance of low carbon energy assets, and support our wider customer offer.” The share of the primary energy from renewables is projected to increase from around 5% in 2018 to 60% by 2050 in bp’s Net Zero scenario. These digital platform technologies help to flexibly balance supply and demand, and maximise the performance of low carbon energy resources.
“For the growing renewable energy capacity the world needs to meet global carbon reduction targets, we will need efficient energy optimisation. As such Open Energi is fantastically positioned to grow, and we could not be more excited to be partnering to deliver that growth with bp Launchpad,” rounded off David Hill, Open Energi Commercial Director.
“Its role within the business will allow us to maintain our independence, while bp’s net-zero ambition and its new strategy align perfectly with our ambition and vision.”
POWERFUL PROGRESS
Within 10 years, bp aims to have increased its annual low carbon investment tenfold, to around $5 billion a year, constructing an integrated portfolio including renewables, bioenergy and early positions in hydrogen and CCUS. By 2030, the aim is to have developed around 50GW of net renewable generating capacity, a colossal twentyfold increase from 2019, and to have doubled its consumer interactions to 20 million a day.
“Bp has been an international oil company for over a century – defined by two core commodities produced by two core businesses. Now we are pivoting to become an integrated energy company – from International Oil Company (IOC) to Integrated Energy Company (IEC),” it says of the seismic shift from a company driven by the production of resources, to one that is focused on delivering energy solutions for customers.
Since outlining its new strategy a year ago, bp has made strong progress in its transformation to an IEC. Strong results in the second quarter and half-year of 2020 highlight resilient operating performance, with four major project start-ups, material growth in convenience gross margin and delivery of $2.5 billion of cash costs savings around six months earlier than targeted.
All in all, the last year has seen bp deliver eight major projects, build a 21GW renewable pipeline, increase convenience and electrification, reached over $10 billion of divestment proceeds and begun share buybacks. “We are a year into executing bp’s strategy to become an integrated energy company and are making good progress – delivering another quarter of strong performance while investing for the future in a disciplined way,” summarised Looney.
“This shows we continue to perform while transforming bp – generating value for our shareholders today while we transition the company for the future.” It also demonstrates clearly that bp is perfectly on track to dramatically reduce carbon in its operations and production, and grow new low carbon businesses, products and services.
“Our purpose is reimagining energy for people and our planet,” bp reflects. “We want to help the world reach net zero and improve people’s lives.
“This coming decade is critical for the world in the fight against climate change, and to drive the necessary change in global energy systems will require action from everyone. We believe our new strategy provides a comprehensive and coherent approach to turn our net zero ambition into action.”