British Petroleum – BP – has announced plans to cut oil production by a staggering 40%, announcing it will be investing dramatically more into green energy production.
Earlier this week, BP announced a significant change in its future direction alongside a second-quarter loss, and a cut to the company’s dividend by around 50%.
BP has said it plans to increase its investments into clean energy production to $5 billion by 2030, and is aiming to reduce its emissions to net-zero by 2050.
“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,” a statement from BP read.
“BP forecasts demand for fossil fuels to drop by as much as 75% in the next three-decades.”
Markets reacted positively to the announcement from BP, with share prices jumping as much as 8% upon hearing the news.
BP forecasts demand for fossil fuels to drop by as much as 75% in the next three-decades if temperature-rises around the globe are limited to 1.5-degrees C. The company says if warming is limited to 2-degrees C, demand is expected to drop by 50%.
BP’s head of strategy, Giulia Chierchia has told investors that the company will reduce its oil and natural gas production by one million barrels per day leading up to 2030; this represents a 40% drop on 2019 production figures.
CEO, Bernard Looney has said in a statement that “we believe that what we are setting out today offers a compelling and attractive long-term proposition for all investors.”
The company is planning on investing that $5 billion into hydrogen, carbon capture and storage, bio-energy and electric vehicle charging infrastructure. Currently, BP has 7,500 electric vehicle chargers, with plans to bring this number to 70,000 in the near future.
To financially underpin its strategic vision, BP is planning on selling as much as $25 billion worth of assets in the next five years.
BP also used the announcement to detail the impact of the coronavirus pandemic on its bottom-line, after the price of Brent crude oil dropped to a nearly two-decade low of $20 a barrel. Currently, it stands at $44 a barrel, which is 35% lower than the start of the year.
As a result, BP reported a loss of $16.8 billion in the second-quarter of 2020, writing down the value of its assets due to the low-price forecasts for oil. The company has slashed its dividend by 50% to USD 05.25 cents, but has assured investors of a 60% return of surplus cash with share buy-backs.
“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 into the energy transition at scale,” BP said in a statement.
BP’s CEO Bernard Looney added that “it is a decision that we wholeheartedly believe is in the long-term interest of our stakeholders.”