Russia muddies BP’s fade to green | Business

The race of the European oil companies to leave behind that last name and become simply energy has been launched for years. The paradox is that, with crude oil prices skyrocketing and one of the world’s largest exporters – Russia – out of the picture, the opportunity that has opened up for them in recent months is vintage. And nobody is willing to waste it. Neither does BP. The future, however, points in another direction. So believes, at least, the CEO of the British oil and gas giant, Bernard Looney (County Kerry, 52 years old).

The Irish Executive attends Business at the company’s headquarters in Madrid, in the first visit to the Spanish capital by a top manager of BP in almost two decades. It’s not random. “It is a central country in our future strategy: until now it was a business that we were very proud of but that had no growth potential. The energy transition has changed that completely and Spain is at the beginning of a new energy chapter that puts it back on the map”, he acknowledges while sipping a black coffee. “It has a central role in the energy transition, not only for us as a company but for Europe and the world: its energy system continues to depend on imported oil, but the abundance of sun and wind is an immense opportunity on several fronts: for the development of the electric car, to produce and sell green hydrogen to central and northern Europe…”.

The backbone of his speech is the promise of green change. With one of the most polluting histories on the British business scene, BP wants to leave that past behind to embark on a major turn of the screw on its business. “We are transforming the company from top to bottom. We have dedicated 112 years to oil and gas production, but now we are going down [la dependencia de ambos combustibles] up to 40%. So it cannot be said that we are doing business as usual: it is what our employees and society ask of us. And it is also a huge business opportunity”, he points out in a conversation that lasted just over half an hour. Looney knows well what it is to break the mold: born into a family of farmers dedicated to the sale of milk and dairy products in the west of Ireland, he was the first of them to go to university, where he graduated three years ago. decades as an engineer.

some limits

The radical shift in his model, however, has limits: those imposed by a global energy system that continues to rely 80% on fossil fuels. “Oil and gas will continue to be present [en la matriz energética] for many decades. How many? I don’t know: the International Energy Agency’s net-zero emissions scenario still calls for production of 20 million barrels per day in 2050.” Today they are just over 100 million.

The big question, he says, is how to minimize the release of greenhouse gases associated with its extraction and, above all, its burning. “There is a reason to talk about net zero and not zero emissions [a secas]: net means that we will have to deal with this carbon in some way: planting trees, avoiding deforestation or capturing it… The world needs technologies to capture and store this gas”, he claims. “To achieve the goal of 1.5 degrees [que el aumento de la temperatura respecto a los niveles preindustriales no supere esa cifra] we are going to need all the available tools: we cannot start from the ideological position according to which this technique is only one way of the industry [petrolera y gasista] to continue doing the same”.

The promise of the second largest oil company in Europe by sales after Total —and one of the largest in the world— is that 20% and 40% of its investments will be in sectors completely unrelated to hydrocarbons in 2025 and 2030, respectively , compared to 3% in 2019. That is the future. Today, its bottom line dependence on dirty energy remains significant: “We continue to provide what the world needs: fundamentally hydrocarbons, but also the products that consumers want and need to replace them. And the money we get is being invested on a large scale to speed up the energy transition. It is not one thing or the other: we are doing both things at the same time. That is what is expected from an integrated energy company”, he adds.

-Let’s look at the figures in reverse: even in 2030, oil and gas will continue to account for a majority fraction of your investments and your business.

-If you tell me the price of oil that we will have, I will be able to answer you. The important thing is that we are building a sustainable source of income, growing and independent of the price of crude oil. And that is attractive to investors.

Has he hit the ceiling? Brent?

-Whoever thinks he can guess it will be fooling himself. There are too many variables at play: who would have predicted a war in Europe? What will happen in Libya? And with the sanctions on Iran? Will he recover and come back [al mercado] Venezuelan production? Will it continue to grow? fracking in United States? Will electrification take off? Are we headed for a recession? With so many open questions, it is very difficult to venture anything.

-Are you facing the last opportunity to make money with fossil fuels?

-I don’t know, but sometimes people forget that more than 50% of current energy needs are still covered by oil and gas. And that is something that we cannot change overnight. Current investments in hydrocarbons are consistent with the objective [climático] that we all want, but the demand is not.

The sudden commitment of the oil companies to ecology and sustainability, as they saw that their traditional business had an expiration date and that the money of the future will come in renewables, scales the environmental sectors, who accuse them of seeking only money laundering. green face. “I understand that there are people who can say that, but I do not agree: we have cut our dividend in half, in part to be able to undertake this transition; we have written off assets valued at 20,000 million dollars (19,200 million euros) because we consider that they are no longer productive; and we have undertaken the largest restructuring in the history of the company… ”, he replies.

Two years ago, Looney continues, BP had no presence in offshore wind and green hydrogen, with only five gigawatts of green technologies in its pipeline and just 7,000 electric car charging points. “Now we have five gigabytes of wind offshore, more than 25 gigabytes of renewables, several hydrogen projects and 13,000 recharging points. That is not a facelift, they are businesses that help the world to decarbonize and that, at the same time, generate good returns and value for our shareholders”.

In recent months, two controversies have placed the Irish manager in the eye of the hurricane in the United Kingdom. With citizens suffering unusually high prices and shortly before the government of conservative Boris Johnson launched an extraordinary tax for energy companies to contribute part of their extraordinary profits derived from the price crisis to the treasury, Looney dropped that his company was a “money making machine”. “What I really wanted to say is something obvious: that with high oil prices, the company makes more money than with low prices,” he justifies while recalling that in 2020 —the year of the pandemic—, BP scored “the largest losses of its history.

Exit from Rosneft

The second cloud of dust has to do with the express flight of the British oil company from the capital of its Russian counterpart Rosneft shortly after the start of the war, which has resulted in losses of more than 25,000 million euros. “I am not going to comment on whether it has been the best or the worst investment. We made a decision and 96 hours after the invasion we were one of the first companies in the world, if not the first, to leave [de Rusia]. We believe it was responsible and in the best long-term interest of our shareholders,” argues Looney, then a member of Rosneft’s board of directors.

Almost four months later, the CEO of BP applauds the oil veto recently approved by the Twenty-seven. “He is finding his own way. Ourselves [las petroleras] we are disconnecting the previous contracts and not signing any new ones. The continent will be able to find a way out of the situation”, he slides while seeing the supply of gasoline and diesel to European and British service stations guaranteed: “I have no evidence to suggest that we have to be concerned about this issue. Supply is working well and stocks are also at relatively good levels.”

Natural Gas is a completely different movie. An embargo on Russia in the image and likeness of what happened with crude oil is “more complicated: that is why no measures have been taken so far. It is possible to do it, yes, but it takes more time”. How many? One or two years? Maybe more? “More than one, that’s for sure. That is the reality: if you want to do it in a way that does not destroy the economy, it will take several years. In the last half year, BP has brought 34 methane tankers loaded with liquefied natural gas (LNG, the three acronyms that are changing the world energy map) to European shores. A figure to which we must add another “ten or twelve” who have arrived in the United Kingdom.

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