Assessing BP's New Goals

Oil and gas

Reduce production by 40%; no exploration in new countries

The radical move to slash production by 40% within the next decade goes much further than any oil company to this point. Analysts at Carbon Tracker said BP would have to cut hydrocarbon production by 25% before 2040 to meet the goals set under the Paris Agreement on climate change. 

“Slashing oil and gas production and investing in renewable energy is what Shell and the rest of the oil industry needs to do for the world to stand a chance of meeting our global climate targets,” Mel Evans, senior climate campaigner for Greenpeace U.K., said. “This is a necessary and encouraging start.”

BP is set to meet a majority of these reductions by simply moving it off its books. Looney said in an interview with Bloomberg TV that BP's production cuts will come "predominantly through divestments." In the end, real reductions in the use of fossil fuels will come from the world reducing its demand for oil and gas, said Carbon Tracker's Coffin.

The new goals also do not include cuts to production from Rosneft in which BP owns a 20% stake, according to a company spokesman.

"Leaving Rosneft's production out of this is going to become untenable at some point, as it will become a larger and larger share of emissions as BP's production shrinks," said Andrew Logan, senior director of oil and gas at Ceres.

Bioenergy

Produce more than 100,000 barrels a day of bioenergy, up from 22,000 today

At first blush the bioenergy target seems modest — it’s equivalent to about 7% of the company’s reduced oil and gas output in 2030, according to Coffin.

Producing biodiesel with current technology is still much more expensive than its fossil fuel cousin. So the market will need regulation in the form of mandates or carbon pricing to make it economical. In all climate scenarios that envision a clean energy future, bioenergy’s share of the mix is expected to rise so BP could revise its goals depending on what future government policy support for the alternative fuel looks like. 

Emissions

Cut upstream emissions to 235 million metric tons, from 360 million metric tons today 

BP’s pollution target stands out as it includes an absolute emissions goal whereas other companies set long-term climate goals based on carbon intensity. That’s a measure of carbon emissions per unit of energy produced and a number that can be easily manipulated.

By 2050, the company aims to zero out all emissions tied to the oil and gas it produces, and now it has set an interim goal of 40% reduction by 2030. There is still room for improvement, in the eyes of environmentalists at least. The plan does not include emissions linked with refinery outputs from crude oil that other companies have extracted or energy products that BP markets, such as power or gas supply agreements. On the remainder, which is as much as 640 million metric tons, the company has set a target of cutting carbon intensity in half.

BP Plc posted the biggest earnings-day share gain in at least 10 years on Tuesday despite slashing the dividend by 50% and abandoning its progressive payout policy. 

“Where is growth going forward? There’s one clear direction,” Charlie Donovan, executive director at the Centre for Climate Finance and Investment at Imperial College London and formerly head of structuring and valuation for BP’s global power business.

--With assistance from Laura Hurst.

To contact the authors of this story:
Akshat Rathi in London at arathi39@bloomberg.net
Will Mathis in London at wmathis2@bloomberg.net

To contact the editor responsible for this story:
Jeremy Hodges at jhodges17@bloomberg.net
Amanda Jordan

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