Oil and gas giant BP has said it will cut oil and gas production over time to become a net zero company by 2050.
But many questions remain over its interim targets, and industry experts say absolute reductions need to happen soon, to limit global warming to the Paris Agreement goal of 2°C or lower.
The British company’s landmark net zero pledge on February 12, by new chief executive Bernard Looney, was hailed as a bold move that went further than most pledges made by other major oil firms, which tend to centre around carbon intensity and not absolute reductions.
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But how BP executes its ambition will make all the difference, analysts said.
The company will reveal more details of its strategy and near-term plans in September, when it hosts a capital markets day.
BP’s ambition was not expressed as a binding target, observed analyst Mike Coffin of financial think tank Carbon Tracker.
As of 2019, BP “forecast continued growth in oil and gas production at a rate higher than global demand growth, let alone the reductions that will be required to hit the Paris goals”, he wrote.
In a report last year, Carbon Tracker found that the world’s listed oil and gas companies must cut combined oil and gas production by 35 per cent by 2040 to achieve climate targets and protect shareholder value. Specifically, BP should cut production by 25 per cent.
BP said last week that it generates 360 million tonnes of CO2-equivalent through the oil and gas it explores and produces, including when the fossil fuels are sold and eventually burnt. Another 55 million tonnes of CO2-equivalent are from its extraction operations and refineries worldwide.
The 360 million tonnes of CO2-equivalent are known in industry parlance as scope 3 emissions.
“Even with the significant deployment of (carbon-dioxide removal technologies) and purchase of offsets, it is hard to imagine that BP would be able to reach net zero without an absolute reduction in production volumes,” said Coffin, a former geologist at BP.
“The deployment of carbon capture, usage and storage at the scales assumed in many scenarios remains a challenging prospect to say the least, and generally continues to lack a clear value proposition for investment,” he added. Questions also remain over the land-use implications of growing many more trees for offsets.
It is hard to imagine that BP would be able to reach net zero without an absolute reduction in production volumes.
Mike Coffin, analyst, Carbon Tracker
What’s the best path to decarbonisation?
Looney said that BP would “very likely” be producing and refining hydrocarbons in 2050. Although the company will increasingly invest in low-carbon businesses, it refused to commit to an “arbitrary or pre-set” number.
Parul Chopra, research and business intelligence firm Rystad Energy’s vice-president of upstream research, said BP had US$3 billion of investments in renewables as of 2019. It owns 2 gigawatts of installed capacity, one each in solar and wind.
BP’s announcement could mean the divestment of some high-emission upstream assets, he told Eco-Business. Upstream refers to exploration and production of oil and gas, which are turned into finished products like diesel downstream. One such asset is rumoured to be the Azeri–Chirag–Gunashli oilfield in Azerbaijan, a country at the crossroads of Europe and Asia.
BP’s decarbonisation strategy could also include research and development to reduce battery charge duration, collaborating with electric vehicle and clean energy firm Tesla on storage technologies, and exploring carbon storage avenues in the United Kingdom, Chopra said.
While BP did not put a cap on absolute emissions resulting from the products it sells (which include crude oil extracted by other firms), merely pledging to halve their carbon intensity, some industry analysts such as Coffin said its overall pledge is progressive.
BP’s ambition is surpassed only by Spain’s Repsol, a smaller refiner and producer, which has pledged to fully eliminate its scope 3 emissions, including the fuel it buys from other parties and sells to consumers.
More than electricity from renewables
If backed by real action, decarbonisation pledges by major oil companies could help other sectors make the energy transition, noted Jason Bordoff, founding director of the Center on Global Energy Policy at Columbia University in the United States.
“Deep decarbonisation involves far more than just generating electricity from renewables,” he said in a commentary for Reuters. “Hard-to-abate sectors like industry, heating, shipping, aviation and trucking will require different solutions, such as carbon capture, carbon removal, hydrogen, biogas, biofuels and more. Large oil and gas companies have the engineering, capital and project management capabilities to develop and scale such technologies.”
Climate activists, however, are sceptical that BP’s announcement is more than a public relations exercise. BP is one of just 25 major fossil fuel producers responsible for more than half of the world’s industrial greenhouse gas emissions, said clean energy movement 350.org’s UK campaigner Ellen Gibson.
“BP has known for decades that their core business was pushing the climate to the breaking point, but they continued to dig, pump and drill to maximise profits for their CEOs and shareholders while the rest of us, and especially the poorest communities around the world, are picking up the costs,” Gibson told Eco-Business.
If BP is serious about aligning its business model with the Paris Agreement, the company must stop searching for more oil and gas, and keep existing reserves in the ground, she said.