‘BP’s CEO downplays renewable power increase as returns lag’

Out of masterresource

By Robert Bradley Jr – February 2, 2023

“[CEO Bernard Looney] and other BP executives have suggested the company may downplay future investments in areas like solar and offshore wind, according to some of the people. Discussions about the company’s direction have created rifts within BP over the past year, say those close to the company.”

The Wall Street Journal published a very revealing article yesterday. “Bernard Looney is trying to sharpen the strategic focus with less emphasis on environmental goals,” reported Jenny Stasburg (February 1, 2023).

She starts:

Chief Executive Bernard Looney plans to roll back elements of the oil giant’s high-profile push into renewable energy, according to people familiar with the recent discussions.

Mr Looney has said he was disappointed with the returns on some of the oil giant’s renewable energy investments and plans to pursue a tighter green energy strategy, people said. He has told some people close to the company that BP needs to do more to convince shareholders of its strategy of maximizing profits in areas where it has a competitive advantage, including its legacy oil and gas operations.

In some conversations, Mr Looney said he plans to place less emphasis on so-called ESG targets – a collective term for environmental, social and governance – to make it clear that these do not distract the company from its ability to make profits, people said.

So trying to appease the enemy becomes prohibitive even with government subsidies? Politically correct, economically incorrect investments ultimately cause trouble. And when BP’s oil and gas opponents yell “greenwashing” and call for more bad investments – and threaten to sue for not doing enough (greenhushing) – then BP is smart about getting smart.

Of course, BP wants both. The article continues:

Mr. Looney, people said, sees the moves as a modest near-term course correction rather than a major strategic linchpin for the 114-year-old company.

Investors, the owners of the company, are important:

Analysts and some investors say BP’s commitments away from fossil fuels and toward renewable energy could hurt the company’s performance. Many companies are struggling to transition to new green technologies while still relying heavily on traditional energy sources.

A BP spokesperson referred to previous public statements Mr Looney and BP have made about the company’s strategy, including its commitment to reducing carbon emissions and shifting investments towards green energy. Mr Looney declined to comment on the speaker.

BP is expected to report full-year results on February 7 after consecutive record quarters fueled by massive gains in its natural gas trading arm. The company will update investors on its strategic progress at this point, the spokesman said.

BP has long sought to ‘outgreen’ its competitors Big Oil and Big Gas amid green extremism in the UK and EU. It started with John Browne in 1997 and went downhill from there, with imagination about climate change alert taking precedence over real environmental and security protocols, culminating in the Deepwater Horizon disaster. (Shell came second and also paid a price.)

Back to the article:

Mr. Looney, a 32-year BP veteran, took over as CEO in early 2020 and soon announced commitments to reduce greenhouse gas emissions, including from oil and gas that the company sells. Analysts said at the time that the new targets went beyond rivals’ plans. Investors wondered how renewable energy might offset fossil-fuel companies that typically generate higher — if volatile — returns.

Shares of BP and London-based competitor Shell PLC have underperformed their US peers, particularly the largest Exxon Mobil Corp, in recent years. BP shares are up about 7% since late January 2020 after recovering from pandemic lows, while Exxon shares have nearly doubled over the same period.

As European oil companies, BP and Shell face more scrutiny from investors and governments over their carbon reduction plans than their US peers, which are more attached to their core oil and gas businesses. Overall, however, the sector has found itself caught between some major investors and governments around the world, who are urging these companies to move away from fossil fuels, while others are demanding the profits these assets can generate.

Yes, ExxonMobil dismissed Net Zero as impractical and bad public policy.

Looney knows he can’t be too bold in the transition from wind and solar etc. to the real energies that consumers are asking for.

Mr. Looney has said in some recent discussions that the company will continue its push into renewable energy, but with a more fine-tuned focus to avoid spreading resources too thinly or over-emphasizing renewable energy in its broader strategy. He has suggested areas of further focus will be the development of climate-friendly hydrogen, biogas and electric vehicle partnerships and charging networks, the people said.

He and other BP executives have suggested the company may downplay future investments in areas like solar and offshore wind, according to some of the people.

Discussions about the company’s direction have caused rifts within BP over the past year, people close to the company say.

Final comment

Like Enron, BP has become a counter-capitalist company, jumping on government subsidies, supporting public policies that harm average consumers, and employing deception about the energy/climate reality. It takes more than a “modest short-term course correction.” Looney and BP must formally relinquish what was announced three years ago:

“…we are committed to becoming a net zero company by 2050 or sooner and helping the world reach net zero…. We need the support of partners, investors, policymakers, customers – and trade associations… (Bernard Looney, CEO, BP, 2020)

That support is gone. The company’s opportunity now is to educate people about the benefits of oil and gas (and coal) and to use climate data to challenge scientific hyperbole. (Remaining not-so-green, government-subsidized investments in hydrogen, biogas, and EV ventures also need reconsideration.) Expect fireworks and lots of CO2 emissions from a reborn BP.

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