London — BP's new CEO Bernard Looney outlined Wednesday ambitious new targets for the oil major to become a "net-zero" carbon emitter by 2050 or sooner as he looks to position the company to take a leading role in tackling climate change with cleaner energy.
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The new "ambitions" cover greenhouse gas emissions from BP's operations and the carbon emitted from the oil and gas it produces on an absolute basis, including the use of carbon "sinks" such as carbon capture and tree planting.
Looney, who replaced Bob Dudley last week as CEO, also promised to boost spending on low-carbon business and invest less on oil and gas "over time" but gave no firm commitments on future capex allocation targets.
"We expect to invest more in low carbon businesses -- and less in oil and gas -- over time. The goal is to invest wisely, into businesses where we can add value, develop at scale, and deliver competitive returns," Looney said in a statement
BP's net-zero ambition covers the greenhouse gas emissions from its operations worldwide, currently around 55 million mt of CO2 equivalent (MteCO2e) a year, and the carbon in the oil and gas that it produces, equivalent currently to around 360 MteCO2e emissions a year.
BP also said it aims to help its customers reduce their emissions -- or Scope 3 emissions -- by halving the carbon intensity of the products it sells by 2050 or sooner through more low- and no-carbon products.
The UK-based major is not the first integrated oil company to target reductions in its greenhouse gas emissions. Spain's Repsol has committed to achieving net-zero Scope 3 emissions by 2050 but by using mostly carbon offsets such as tree planting and carbon capture and storage (CCS). Equinor, Shell and Total have made all made commitments to improve the "emissions intensity" of their products.
BP's net-zero target includes some Scope 3 emissions and is an absolute basis measured in terms of reductions in total GHG emissions, rather than reductions in carbon intensity per unit of energy, the company said. It gave no detail on the carbon reductions from carbon sinks such as CCS.
The targets include plans to install methane measurement at all of BP's existing major oil and gas processing sites by 2023 and then reduce the methane intensity of its operations by 50%. The company also announced plans to step up its industry advocacy for policies that support net-zero such as carbon pricing.
Under the plans, BP's existing upstream and downstream business segments will be replaced by four "more focussed and integrated" units: Production & Operations, led by Gordon Birrell; Customers & Products, headed by Emma Delaney; Gas & Low Carbon Energy, led by Dev Sanyal; and Innovation & Engineering, headed by David Eyton.
Looney said BP remains committed to its target of growing sustainable free cash flow and distributions to shareholders over the long term and maintaining capital discipline.
BP has presented a scenario for its upstream business to 2025 that could see it grow free cash flow from that business by 50% 2025 vs 2021.
Royal Bank of Canada applauded BP's "ambitious" plans, noting the key commitment by BP to leave its 2021 free cash flow targets unchanged.
"We think the broad themes of this release were expected, however, it does look more ambitious than we thought heading into today's event," RBC's Biraj Borkhataria said in a note.
Borkhataria also noted that rapid ramp-up in renewables spending by BP and a shift in capital allocation away from the core business is "likely to be difficult."
BP currently spends around $500 million of capex on renewable energy, with about 3% of its organic capex going toward investments such as solar and biofuels, the second-largest share among its oil major peers behind France Total.
BP is scheduled to present its new business strategy in September to set out its new direction and near-term plans under the new CEO.