BP sets new climate goals, changes firm structure

BP's new chief executive Bernard Looney has set an ambition for the company to halve the carbon intensity of the oil and gas products it sells by 2050. To help achieve this, the firm is dismantling its upstream/downstream organisational model and reorganising its activities into four new business groups, including one dedicated to low-carbon energy.

In addition to halving the carbon intensity of its products, known as Scope 3 emissions, BP aims for net zero emissions across its operations "on an absolute basis by 2050 or sooner". It also wants to become "net zero on carbon" in oil and gas production on an absolute basis within the same timeframe.

This latter ambition "covers the greenhouse gas (GHG) emissions from its operations worldwide" — currently around 55mn t/yr of CO2 equivalent (CO2e) — and the carbon in the oil and gas that it produces, equivalent currently to around 360mn t/yr CO2e, both on an absolute basis.

Together this would equate to a reduction in emissions to net zero from what is currently around 415mn t/yr CO2e, BP said.

BP's longer-term ambitions are similar to those of Shell and some other larger European firms, but they differ in detail. This is not the first time BP has reorganised with a view to cutting emissions, but its ultimately ill-fated 'Beyond Petroleum' rebranding of the early 2000s was not nearly as specific as today's announcement.

"We need to reinvent BP," Looney said. The firm said it will increase the proportion of investment into non-oil and gas businesses over time. But while it will be producing and refining less hydrocarbons by 2050, Looney made it clear that the company must remain "financially strong, able to pay the dividend … and generate the cash needed to invest in new low- and no-carbon businesses".

"The goal is to invest wisely, into businesses where we can add value, develop at scale, and deliver competitive returns," he said.

The company insists that the ambitions do not change its "fundamental commitments", including growing sustainable free cash flow and shareholder distributions, and deleveraging the balance sheet.

Environmental pressure group Greenpeace said BP's ambitions "all seem to apply to Looney's successors, and leave the urgent questions unanswered", including how the company will reach net zero.

Looney said that while he appreciates investors and activists "want more than a vision — you want to see milestones, near-term targets, some ways to measure progress", BP does not have these. "But we will have more to say in September when we announce our new strategy, and in the months and years to come," he said.

The Church of England Commissioners' head of responsible investment Edward Mason said that BP's move is "the ambition that the world needs." The commissioners, which manage an £8.3bn ($10.7bn) investment fund, have been outspoken about the need to divest from companies involved in fossil fuels.

Meanwhile, BP's structural reorganisation will see it replace its upstream and downstream divisions with four new business groups: Production and Operations; Customers and Products; Gas and Low Carbon Energy; and Innovation and Engineering. It will continue its financial reporting under the previous structure until the end of this year.

By Konstantin Rozhnov