BP has introduced a new strategy that will reshape its business from an international oil company to becoming an integrated energy company.
Within 10 years, bp aims to have increased its annual low carbon investment ten-fold to around $5 billion a year, building out an integrated portfolio of low carbon technologies, including renewables, bioenergy and early positions in hydrogen and carbon capture and storage.
By 2030, bp aims to have developed around 50GW of net renewable generating capacity – a 20-fold increase from 2019 – and to have doubled its consumer interactions to 20 million a day.
Over the same period, bp’s oil and gas production is expected to reduce by at least one million barrels of oil equivalent a day, or 40%, from 2019 levels.
Its remaining hydrocarbon portfolio is expected to be more cost- and carbon resilient.
BP’s chairman Helge Lund commented on the announcement: “Energy markets are fundamentally changing, shifting towards low carbon, driven by societal expectations, technology and changes in consumer preferences.
“And in these transforming markets, bp can compete and create value, based on our skills, experience and relationships.
“We are confident that the decisions we have taken and the strategy we are setting out today are right for bp, for our shareholders, and for wider society.”
By 2030, bp aims for emissions from its operations and those associated with the carbon in its upstream oil and gas production (addressed by Aim 1 and Aim 2 of bp’s net zero ambition) to be lower by 30-35% and 35-40% respectively.
The company also has set out a new financial frame to support a fundamental shift in how it allocates capital, towards low carbon and other energy transition activities.
The combination of strategy and financial frame is designed to provide a coherent and compelling investor proposition, introducing ‘a balance between committed distributions, profitable growth and sustainable value, and create long-term value for bp’s stakeholders.’
As part of the investor proposition, bp’s board has introduced a new distribution policy, with two elements:
- the dividend reset to a resilient level of 5.25 cents per share per quarter, and intended to remain fixed at this level, subject to the board’s decision each quarter
- a commitment to return at least 60% of surplus cash to shareholders through share buybacks, once bp’s balance sheet has been deleveraged and subject to maintaining a strong investment grade credit rating.
Earlier this year bp announced its new purpose, net zero ambition and aims, and its determination to reimagine energy and reinvent bp.
Building on the purpose, together with bp’s beliefs about the future of energy systems and changing customer demands, the strategy sets out how bp expects to deliver its ambition.
Bernard Looney, bp’s chief executive officer, commented on the company’s new direction: “We believe that what we are setting out today offers a compelling and attractive long-term proposition for all investors — a reset and resilient dividend with a commitment to share buybacks; profitable growth and the opportunity to invest in the energy transition.
“I want to acknowledge the impact the reset dividend will have on many – whether individual retail investors or large holders.
“However, it is a decision that we wholeheartedly believe is in the long-term interest of our stakeholders.”
The company’s new strategy outlines: “bp has been an international oil company for over a century, defined by two core commodities produced by two core businesses.
“Now we are pivoting to become an integrated energy company from an international oil company, from a company driven by the production of resources to one that that’s focused on delivering energy solutions for customers.
“We believe our new strategy provides a comprehensive and coherent approach to turn our net zero ambition into action.
“This coming decade is critical for the world in the fight against climate change, and to drive the necessary change in global energy systems will require action from everyone.
“So, in the years ahead, bp is going to significantly scale-up our low-carbon energy business and transform our mobility and convenience offers.
“We will focus, and reduce, our oil, gas and refining portfolio.
“And, as we drive down emissions on our route to net zero, we are committed to continuing to deliver long-term value for our stakeholders.”
