An oil giant’s epiphany on climate change

BP’s slow shift to clean energy since the Deepwater Horizon spill is picking up speed, perhaps setting an example for the petroleum industry.

Logos of the largest publicly traded oil companies: BP, Chevron, Exxon Mobil, Royal Dutch Shell, and Total.

One of the pandemic’s economic effects has been a drop in demand for oil. Yet once the global economy recovers, will oil demand go back up? Some experts say no, given other ongoing shifts away from fossil fuels. Humanity may finally be reaching “peak oil consumption” a century and a half after the first oil well was drilled.

Oil and gas will still play a big role for decades. Fossil fuels, including coal, currently are about 85% of the world’s energy supply. But as more consumers, businesses, and governments tackle climate change, alternative sources – wind, solar, geothermal, nuclear – will continue to gain ground.

One bright spot in this energy transformation is BP, the world’s sixth-largest petroleum company. Over the past decade, ever since its Deepwater Horizon rig gushed oil into the Gulf of Mexico, BP has had a slow epiphany about the commercial wisdom of relying on carbon fuels. Once known as British Petroleum, it now seems ready to become the Beyond Petroleum company.

In August chief executive Bernard Looney said BP aims to boost its spending on low carbon projects from $500 million a year to $5 billion a year within a decade. “We’re transforming BP into a very different kind of company,” Mr. Looney said. “Not overnight, but quickly.”

According to Dev Sanyal, BP’s executive vice president of gas and low-carbon energy, in the next five years BP will initiate more than 20 gigawatts of renewable energy projects, from about 2.5 gigawatts today. The company will also stop looking for new oil and gas sources and would cut its oil and gas output by 40%.

Instead it will invest in giant offshore wind as well as solar projects, perhaps reimagining its thousands of BP gas stations as convenience stores with recharging stations for electric vehicles. It aims to be a carbon neutral company by midcentury.

The plan is to keep profits from fossil fuels flowing long enough to transition BP to something more like an electric utility that could offer investors solid, though not spectacular, dividends in the 8% to 10% range.

The alternative, Mr. Looney said, was to not act and wait to get “regulated out of business” by measures aimed at halting climate change.

The latest edition of the company’s respected World Energy Outlook lays out three scenarios for the oil market. One shows rapid moves to protect the environment and climate, resulting in a dramatic drop in oil consumption. A second is less aggressive but still results in much lower oil use. And even its “business as usual” shows consumption staying at current levels and then drifting gradually downward.

Other oil giants have faced the same dilemma as BP: change or become less and less relevant. ExxonMobil recently lost its place as one of the 30 benchmark stocks making up the Dow Jones Industrial Average.

Ramping up clean energy might need companies capable of building giant infrastructure and yet nimble and enlightened enough to transform themselves. BP is showing a new course in a world weaning itself off energy sources that pollute.

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