Monday 22 June 2020 11:47 am

Beyond Petroleum: Is BP finally moving from rhetoric to reality?

Josh Williams is managing director of The Draft

Kneeling in prayer for a sin he doesn’t regret, Shakespeare’s Claudius, Hamlet’s fratricidal uncle, ruefully admits: “My words fly up, my thoughts remain below, / Words without thoughts never to heaven go.” 

Claudius knew that empty rhetoric is entirely unpersuasive — a lesson many corporate executives have since learnt.

In 2000, BP hired the advertisers Ogilvy & Mather to help the company construct an empty prayer. A colourful new logo was created and, with its bank balance no doubt many millions lighter, BP declared it was moving “Beyond Petroleum”.

Read more: BP to write off up to $17.5bn after oil price crash

If you want to discover what a business really thinks, you are better off looking at its actions. Shortly before “Beyond Petroleum” was launched, BP made some instructive acquisitions. 

For $26.5bn, it acquired the oil-drillers ARCO. This was set against a piddling $45m investment in 50 per cent of Solarex, a solar company it already part-owned. 

Weigh the two and you can make your own mind up about whether this was a company moving beyond black gold or drilling deeper into its wells.

What remained of the goodwill towards the Beyond Petroleum project went up in flames most spectacularly in the Gulf of Mexico in 2010. A drilling rig exploded and one of the worst environmental disasters in human history ensued. 

If you couldn’t see BP’s pursuit of more petroleum when it was mostly underground, you could hardly miss it now. Over the course of 87 uninterrupted days, 200 million gallons of the stuff spilled into the sea.

With this history, any announcement of grand environmental ambitions from BP comes with a health warning. So it was with some scepticism that the world responded to new chief executive Bernard Looney’s announcement in February that the company would be net zero by 2050.

Last week, however, those who watch actions and not announcements would have noted that BP might indeed have changed its thinking. 

On Monday, the company wrote down the value of its assets by around £14bn. Even for a business of BP’s size, this is significant, equal to a fifth of the company’s market capitalisation.

The cause was the recent plunge in oil prices and the suggestion that BP does not expect them to rise by much in the years to come. Most significantly of all, this means that oilfields which BP owns the rights to will now be left unexplored. Oil that might once have been burned will stay in the ground.

After a lifetime at BP, Looney credits his Damascene conversion to environmentalism to the persuasive powers of “a woman who probably has influenced me more than anyone who is an activist”. But there is a financial imperative here too, and that is what counts.

The price of oil has crashed so dramatically since the Covid-19 pandemic began that at one point it reached an extraordinary nadir: the US oil futures market fell for the first time ever into the negative. In layman’s terms, that meant that if you were able to store oil, a seller would pay you to do so. 

This negative pricing was only a blip, but Looney clearly believes that low prices are here to stay. As the world recovers from coronavirus, there are signs across the world that the economic recovery might well be greener. 

Green New Deals are being touted across the Atlantic, from the European Commission to the Democratic National Convention. Climate activists have been talking for some time about “stranded assets”: the fossil-fuel heavy assets that will never be realised if the world is to move to net zero. 

While BP might not use the language, the logic appears very similar. Looney has said that it is possible we have already passed “peak oil”, and he is clearly determined that his business is prepared for that eventuality.

BP, which has been criticised in the past as being slow and late to the environmental cause, could now leapfrog its peers. A fossil-fuel company moving to net zero would be a huge achievement, but it is not without precedent. Denmark’s Orsted was once DONG energy, an oil and gas business. Today, it is the largest offshore wind-farm company in the world and Denmark’s principal power producer.

We are still a long way from Beyond Petroleum. But Looney believes that we are only 30 years from a net zero BP. He has promised that in September the company will lay out a more detailed plan that shows the path to that destination. But he has shown already that there is more to his commitment to net zero than there was to Beyond Petroleum 20 years ago. 

In this febrile age, corporate saints and sinners have been assigned with alacrity. Unlike his predecessors, Looney’s prayers appear heaven bound.

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Main image credit: Getty

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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