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BP will sell oil and gas assets to fund its ambitious low-carbon strategy even if prices improve, three unnamed sources told Reuters.
A tenfold increase in investments in low carbon businesses to some $5 billion annually is among BP’s new strategic priorities for the next ten years as the supermajor shifts away from its core business and aims to become a net-zero company by 2050.
In addition to the sizeable increase in low-carbon investments, BP will also suspend all future oil and gas exploration in new countries and shrink its production of hydrocarbons by 40 percent by 2030, chief executive Bernard Looney said in a LinkedIn post earlier this week.
In June, the supermajor revised down its long-term projection for Brent crude to $55 a barrel for the period between 2021 and 2050 and said it would base its investment appraisal plans on that price level. The company also reported upstream exploration writeoffs of $6.5 billion for the second quarter, as it had warned in June, on the back of the oil price collapse and the coronavirus pandemic.
Besides the writeoffs, BP’s price assumption revision meant that some $17.5 billion worth of assets became stranded, or unviable under current prices. But even if prices recover to $65 or $70 a barrel, BP will not be using them, the Reuters source said; it will sell them.
The plan makes sense in light of the company’s new priorities. BP announced its plan to become a net-zero company by 2050 in February, shortly before the pandemic unraveled the oil and gas industry, providing an opportunity for the low-carbon agenda to gain even more priority.
“We believe this new strategy provides a comprehensive and coherent approach to turn our net zero ambition into action. Of course, to drive the necessary change in global energy systems will take action from everyone,” chief executive Bernard Looney said.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.