By bolstering a select few oil operations and pumping funds into renewable energy projects, BP is already emerging stronger in the early days of its transition. This week, BP reported its highest profits in 8 years as the company says it is “performing while transforming”.
BP announced that it has experienced a huge full-year net profit, supported by high commodity prices. The British energy firm has reported an underlying replacement cost profit of $12.8 billion for 2021, following a net loss of $5.7 billion in 2020.
Bernard Looney, BP’s CEO, stated of the company’s success, “We are performing and delivering for our shareholders today, while at the same time leaning into the future and transforming the company.”
As well as continuing to strengthen its oil sector, BP is focusing on gas as a way to bridge the gap during the energy transition, as Europe continues to face shortages and rising gas prices. Looney believes more gas will be needed as companies curb their oil production and invest in new renewable energy projects. BP will also be supporting Britain’s energy transition through large investments in Scottish and Irish offshore wind in Scotland and British hydrogen.
In January, BP and German partner EnBW won their bid for a 2.9 GW wind project in the U.K.’s North Sea, expected to power 3 million homes with an investment of $13 billion. BP also won an offshore license for a wind farm in the Irish Sea as well as taking on a 50 percent stake, with Equinor, in two major offshore wind projects off the east coast of the U.S.
Part of BP’s overarching strategy is to ‘accelerate greening’. The energy firm intends to sustain earnings from resilient hydrocarbons through 2030 but also expects to grow its renewable sector exponentially over the next decade. It hopes to have 20GW of renewable power by 2050, increasing this figure to 50GW by 2030.
By incorporating carbon capture and storage (CCS) technologies into many of its oil operations, BP will also decrease its carbon output and be able to repurpose this carbon through hydrogen production, with an anticipated output of 0.7-1.3 million tonnes a year. As BP increases its renewables, hydrogen, and low-carbon oil production, it also expects to slash its emissions substantially, with aims to reduce operational emissions by 50 percent by 2030 – more ambitious than its original 30-35 percent aim for the end of the decade. The innovative firm also expects its energy products to have net-zero lifecycle emissions by 2050.
While BP is far from giving up on oil, it is investing heavily across the renewable energy spectrum. In hydrogen, BP signed a joint development agreement this month with Hydrogen Chemistry Company (HyCC) to develop H2-Fifty, a 250MW green hydrogen plant, in the Netherlands.
Following successful feasibility studies, H2 is expected to replace the fossil fuel feedstock being used at BP’s oil refinery in Rotterdam, as well as across other industries in the region. The plant is expected to reduce carbon emissions by around 350,000t annually, supporting BP’s low-carbon oil operations future.
Last year, BP announced similar plans in Teesside, in the North of England. The $135 million green hydrogen plant would be Britain’s largest, with an expected 60MW of electrolyzer capacity. The energy would be used to power hydrogen cell vehicles, with output estimated to be enough for 1,300 green lorries. The ‘HyGreen Teesside’ project will run alongside a blue hydrogen ‘H2Teesside’ project, making the region a hub for UK hydrogen, and delivering around 30 percent of the country’s target. Together with hydrogen projects, BP will be establishing a renewable power pipeline to support its transportation routes.
BP is also planning large-scale hydrogen projects in the Middle East. Oil giant Oman is looking to expand its energy portfolio as pressures from international organizations for a transition away from fossil fuels are mounting. In January, BP and Oman's ministry of energy and minerals signed an agreement for the evaluation of wind and solar data on 8,000 sq km of land. This supports plans to develop the region into a renewable energy hub, which would include several different power sources.
As well as continuing its oil and gas operations in Oman, BP has brought together a net-zero task force to help develop a roadmap for its future in the country. BP stated of the development, "this partnership represents a significant evolution of BP's business in Oman and is aligned with BP's strategy, which includes rapidly growing our developed renewable generating capacity and to take early positions in hydrogen."
But BP is not only looking at hydrogen to propel it into the future as, last month, the firm hired an executive from Danish wind energy company Orsted to manage a new offshore wind division. Matthias Bausenwein will take his expertise from the world’s biggest offshore wind farm operator to join BP later in 2022. BP CEO Looney explains, "Bringing in leaders of this caliber is a massive vote of confidence in our strategy. And they will help us deliver."
With BP reporting huge profits from its first year of transition, as it invests heavily in low carbon oil, CCS technology, green hydrogen, and its renewable energy operations, it looks set to establish itself as one of the energy majors of the future.
By Felicity Bradstock for Oilprice.com
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