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| BP says it has reformed its culture over the past decade to emphasise operational security and to prevent environmental damage (AFP Photo) |
London (AFP) - Ten years after an oil spill that BP's new boss Bernard Looney admits tested the company "to the core", the firm is facing two existential challenges: the collapse of prices and climate change.
It was a
decade ago this week that an explosion on the Deepwater Horizon rig in the Gulf
of Mexico triggered the worst oil spill in US history, killing 11 employees and
ultimately costing the British firm more than $70 billion.
Speaking in
February as BP announced plans to go carbon neutral by 2050, chief executive
officer Looney said that "we learned some hard lessons we will never
forget".
"We
remember those lessons in this new decade, where the big challenge for BP is
the one the world faces: climate change," he said.
Anglo-Dutch
oil giant Royal Dutch Shell has followed suit in pledging to become carbon
neutral but the US groups and French firm Total are lagging behind.
 |
Map and
factfile on the environmental disaster in the Gulf of Mexico triggered by
the
explosion in April 2010 of BP's Deepwater Horizon oil drilling platform US
environment energy oil disaster (AFP Photo)
|
BP says it
has reformed its culture over the past decade to emphasise operational security
and to prevent environmental damage, for example through a programme to detect
methane leaks.
The
company's latest figures show an increase in its oil spills from 124 in 2018 to
152 in 2019, but BP puts this down to acquisitions over the period.
The 2020s
began amid greater pressure on multinationals to reduce their carbon emissions,
from investor demands to dramatic protests by climate campaigners.
The global
coronavirus pandemic has brought a new and unprecedented challenge for oil
firms, causing a drop in demand that has sent prices plummeting.
The
collapse in prices complicates the transition to cleaner energy for oil majors,
because cheap oil makes green energy comparatively less attractive.
 |
For
campaign group Greenpeace, the choice for the industry is clear: 'Either
becoming renewable energy companies or ultimately shutting down' (AFP
Photo/Mark RALSTON)
|
BP puts
almost all of its $15 billion annual investment budget into fossil fuels,
although it has acquired stakes in solar panel firms and electric vehicle
charging companies worth a total of $400 million.
"Their
basic business model hasn't changed," said Bobby Banerjee, professor of
management at City, University of London.
"They
invest most of their money in gas and oil" because "they're confident
there will be demand for oil" in the next 50 to 70 years, he said.
He said for
BP, the energy transition was all about shifting from oil to gas, which is
still a polluting hydrocarbon.
"The
return they get on fossil fuels is not the return they'll get on
renewables," he said.
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In this
file photo taken on June 08, 2010, veterinarians clean an oil-covered brown
pelican found off the Louisiana coast and affected by the BP (AFP Photo/Saul
LOEB)
|
Changing
the model
Russ Mould,
investment director at AJ Bell, said after the Deepwater crisis BP shed some
assets and bet on low oil prices in the long run, reducing its costs and making
the group more resilient.
But it has
huge debts, totalling some $45 billion at the end of 2019, leaving it
vulnerable to a sustained drop in revenues.
Looney now
faces a dilemma. He must decarbonise the group while preserving its
profitability and share price, which has fallen by 40 percent since the
beginning of the year, a plunge experienced by many rivals.
He has
promised to say more in September about how he will reach his carbon neutral
target and is expected to bet on gas, still untested carbon capture technology
and renewables.
BP could
also take advantage of carbon offsetting schemes, which involve investing in
green projects but are heavily criticised by environmentalists.
For
campaign group Greenpeace, the choice for the industry is clear: "Either
becoming renewable energy companies or ultimately shutting down."
"The
crash in the oil market is the closest thing BP and the rest of the global oil
industry will get to a dress rehearsal for the transition to come," a
spokesperson said.
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