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BP To Cut Oil Production 40% By 2030, And Invest Billions Into Green Energy

In some refreshingly good news for the environment, news coming out of London, BP has announced that it is planning to cut oil and gas production by 40% and invest billions of dollars into clean energy.

In some refreshingly good news for the environment, news coming out of London, BP has announced that it is planning to cut oil and gas production by 40% and invest billions of dollars into clean energy. This is part of a major strategic plan that was unveiled today along with a gigantic second-quarter loss and dividend cut.

A portable EV fast charger from BP charging a Nissan LEAF. Image courtesy BP.

BP wants to create a 10-fold increase in annual low carbon investments in the coming decade, to $5 billion a year by 2030, and it says it is working on its promise of net zero-emissions by 2050. It’s also preparing for a world that uses much less oil, according to CNN‘s reporting on the news.

In a statement, BP said, “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.”

BP expects that demand for fossil fuels will fall by 75% over the next 30 years if global temperatures continue to increase. Its head of strategy, Giulia Chierchia, explained to investors that if the increase in global temperatures is limited to 1.5 degrees Celsius, then the demand for fossil fuels will fall drastically. In essence, BP is listening to Snoop Dog’s advice and dropping fossil fuels like it’s hot.

BP stated that its oil and gas production will fall by around one million barrels a day by 2030, which is a 40% reduction from 2019 levels. However, most of its annual capital expenditure for the next 5 years will still be in oil and gas. This is unsurprising — if BP was to just completely stop producing oil and gas, BP could go out of business.

BP CEO Bernard Looney said in a statement, “We believe that what we are setting out today offers a compelling and attractive long-term proposition for all investors.” The company wants to move more into fields such as bioenergy, hydrogen, carbon capture and storage, and EV charging. In terms of finances, it’s reducing its oil and gas portfolio and raising $25 billion for the transition by selling assets over the next 5 years.

In June, BP sold its petrochemicals business to Ineos for $5 billion. BP’s petrochemicals business included 14 plants across the globe that produced 9.7 million tonnes of petrochemical products. These products include plastic bottles that are filled with soda on the shelves of millions of stores, pharmaceuticals, and packaging trays. The International Energy Agency (IEA) predicts that petrochemicals will become the largest driver of global oil demand and will generate more than a third of its growth through 2030 and nearly half by 2050, but BP is out of that game.

BP’s 2nd Quarter Losses

BP reported a loss of $16.8 billion in Q2 of 2020. It still plans to pay out dividends to its investors, but those dividends were cut by half for now — “it plans to keep payouts fixed at that level in future quarters, while promising to return 60% of surplus cash to investors via share buybacks.”

“The board believes setting a dividend at this level takes into account the current uncertainty regarding the economic consequences of the Covid pandemic, supports BP’s balance sheet and also provides the flexibility required to invest in the energy transition at scale,” the company said.

Why These Losses Are Important For The Clean Energy Sector

Earlier this year, the price of oil went into the negative. It did this right on April 20th, a day that many Tesla enthusiasts and fans (including myself) had set to celebrate Elon Musk’s achievements and mission to date. That joke was regarding Musk’s tweet about possibly taking Tesla [TSLA] private at $420, long planned in advance, but oil serendipitously decided to join in on the festivities with us as it crashed into the negatives per barrel for a bit.

One thing I’ve been noticing is that money talks. It often takes a major loss for companies to even consider changing their ways — especially those in the oil industry. The fact that BP has been flirting with the idea of clean energy, going green, and cutting its carbon emissions for a while seemed laughable at first. However, when such a company makes monetary changes and puts its money where its mouth is, one can start to take it seriously.

If BP decides to truly step up and lead by investing in clean energy solutions and reducing its oil production, then this is something to celebrate. It’s not a full victory against an industry that is fine killing us in order to make profits, but it is a small victory when one such company — such a large company — decides to switch sides. I just hope that BP is truly becoming an ally in the clean energy movement. The demand for clean energy is here, and is highly visible. BP seems to be listening. Hopefully its stance will encourage others to do so as well.

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