bp today introduces a new strategy that will reshape its business as it pivots from being an international oil company focused on producing resources to an integrated energy company focused on delivering solutions for customers.
Within 10 years, bp aims to have increased its annual low carbon investment 10-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 CCUS. 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.
By 2030, bp aims for emissions from its operations and those associated with the carbon in its upstream oil and gas production to be lower by 30-35% and 35-40% respectively.
bp also today sets 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, supplemented by
- 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.
The strategy is built around three focus areas of activity and three distinctive sources of differentiation, underpinned by a new sustainability frame and advocacy for policies that support net zero.
The focus areas are:
- Low carbon electricity and energy: building scale in renewables and bioenergy, seeking early positions in hydrogen and CCUS, and building out a customer gas portfolio to complement these low carbon energies.
- Convenience and mobility: putting customers at the heart of what bp does, helping accelerate the global revolution in mobility, redefining the experience of convenience retail, and scaling bp’s presence and fuel sales in growth markets.
- Resilient and focused hydrocarbons: maintaining an absolute focus on safety and operational reliability, bp intends to drive capital and cost productivity up and emissions down. bp intends to complete the ongoing wave of major projects, decreasing capital intensity, and to continue to high-grade the portfolio, resulting in significantly lower and more competitive production and refining throughput. bp will not seek to explore in countries where it does not already have upstream activities. Rosneft is a fundamental part of bp’s broader portfolio and provides bp with a strong position in Russia.
The three sources of differentiation to amplify value are:
- Integrated energy systems: along and across value chains, pulling together all bp’s capabilities to optimise energy systems and create comprehensive offers for customers.
- Partnering with countries, cities, and industries: as they shape their own paths to net zero.
- Digital and innovation: to enable new ways to engage with customers, create efficiencies, and support new businesses.
Delivering the strategy will see bp become a very different company by 2030. By then, bp aims for:
– investment in low carbon energy to have increased from around $500 million to around $5 billion a year;
– developed renewable generating capacity to have grown from 2.5GW in 2019 to around 50GW;
– bioenergy production to have risen from 22,000 b/d to more than 100,000 b/d;
– hydrogen business to have grown to have 10% share of core markets;
– global customer interactions to have risen from 10 million to 20 million a day;
– electric vehicle charging points to have increased from 7,500 to over 70,000; and
– energy partnerships with 10-15 major cities around the world and three core industries.
Over the same time:
– Upstream oil and gas production is expected to reduce from 2.6 million barrels of oil equivalent a day (mmboe/d) in 2019 to around 1.5mmboe/d; and
– refining throughput is expected to fall from 1.7 million barrels a day (mmb/d) in 2019 to around 1.2mmb/d.
Through this change, bp will continue its commitment to performing as it transforms – maintaining its focus on safety, operational excellence and financial discipline.
The introduction of the new strategy and transformation of bp are expected to deliver material progress towards its ambition to become net zero by 2050 or sooner and its supporting aims. By 2030, bp aims to have delivered significant progress against its first five Aims:
1. Aim 1 – emissions from operations, 30-35% lower than in 2019;
2. Aim 2 – emissions associated with the carbon in bp’s upstream oil and gas production, 35-40% lower than in 2019;
3. Aim 3 – carbon intensity of marketed products, more than 15% lower than in 2019;
4. Aim 4 – measurement of methane in place by 2023, and progress underway to halve its intensity;
5. Aim 5 – investment in low carbon increased from $0.5 billion to around $5 billion a year – and to $3-4 billion by 2025.
bp will give more detail on its strategy, business plans and investor proposition in its capital markets day presentations on 14-16 September.