BP to sell carbonintensive projects
Alignment with Paris accord the stated goal, but other reasons also apply
BP’s CEO plans to sell some oil projects and curb the development of others to align its business with the Paris accord. It is the latest sign that climate concerns are starting to affect the investment decisions of the world’s largest fossil fuel producers.
BP’s CEO plans to sell some oil projects and curb the development of others to align its business with the Paris accord, the latest sign that climate concerns are starting to affect the investment decisions of the world’s largest fossil fuel producers.
Senior BP executives met in the past few days to discuss how to cut carbon as it grapples with a shareholder resolution requiring the company to explain how its spending is aligned with Paris, CEO Bob Dudley said on a Wednesday conference call organised by JPMorgan Chase.
One proposal weighed up by BP’s management team is exiting the most carbon-intensive projects, though Dudley would not say which assets are targets because there are “governments and partners involved”.
“We are certain we’ve got a path, it may not be linear, to being consistent with Paris goals,” Dudley said in conversation with JPMorgan’s head of European oil research Christyan Malek. “There are going to be projects that we don’t do, things that we might have done in the past. Certain kinds of oil, for example, that has a different carbon footprint.”
His comments offer a response to severe criticism of the entire oil industry over its contribution to man-made climate change. BP’s own shareholders sparred with company managers at its annual general meeting (AGM) in May, before voting almost unanimously to require BP to report on how each new investment is aligned with Paris. The report will be issued before its next AGM in May 2020.
Still, the plan may prompt the question how selling assets to another producer can possibly help curb global emissions. For example, Dudley said on the call that the sale in August of BP’s oil and gas fields in Alaska helped it reduce its carbon footprint. But the buyer plans to invest more in the fields than BP would have, potentially increasing production and boosting emissions.
Dudley also pointed out that the main drive behind the Alaska sale was that those fields were struggling to compete for capital within BP because production is unlikely to grow as much as at the company’s other projects.
Dudley said he is juggling the challenge of investing in relatively low-return renewables businesses with maintaining BP’s large dividend. He took aim at those who do not acknowledge how beneficial it is when BP invests in low-carbon technology, saying any assessment of its carbon footprint could include the emissions it avoids.
“We’ll reduce the emissions from our operations, reduce the emissions from our products and come up with the new business models,” he said. “If you add all those figures up in reductions of greenhouse gas for example, we have a big solar business, a big biofuel, wind business you almost get no credit when you do those calculations.”
While he has maintained BP’s business model is already aligned with the Paris accord, he said having to issue a report to benchmark progress has caused the company to think further about its spending.
A report by Carbon Tracker last week said BP’s most polluting investments are the Zinia 2 project in Angola and the AzeriChirag-Gunashli development in Azerbaijan, and that neither of those developments are compatible with the Paris goals.
BP is also seeking to divest assets because its debt is too high, Dudley said on the call. It has announced about $7bn of a $10bn disposal programme linked to the purchase of shale fields from BHP in 2018.
Dudley said the level of flaring, the deliberate burning of methane at the place it is produced, is “not right”, and he is working to reduce it. Earlier this week, the company announced it was adding new equipment to its projects to quantify and identify methane leaks.