Oil and gas assets account for the bulk of BPs losses - Net Zero Investor

Summary

The past decade has been challenging for BP, with the energy giant persistently underperforming many of its peers. The company is now hoping for a major reset, having outlined an updated energy transition strategy at the end of 2024 and appointed a new CEO in late 2025.

A key narrative underpinning…

Source: Net Zero Investor

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Q1: What are the primary reasons behind BP's financial losses related to its oil and gas assets?

A1: BP's financial losses are primarily attributed to its oil and gas assets. Research by the Australasian Centre for Corporate Responsibility indicates that around 75% of BP's disposal losses and impairments since 2020 are related to oil and gas. The company has recorded significant impairments, and its strategy has increasingly focused on oil and gas exploration, contributing to these losses.

Q2: How has BP's energy transition strategy evolved in recent years?

A2: BP outlined an updated energy transition strategy at the end of 2024. This strategy has seen BP reducing its investment in transition businesses from $7 billion to a maximum of $2 billion, focusing more on oil and gas. The strategy aims to reset BP's direction amid financial challenges and underperformance compared to peers.

Q3: What role does BP's clean energy business play in its financial strategy?

A3: BP's clean energy business, while significant, has not been the primary driver of recent financial impairments. Although the company reported a $5 billion loss in its transition business, this is minor compared to the $54 billion in total losses and impairments over five years. Clean energy accounted for 7.5% to 12.4% of impairments but only 7% of capital expenditure.

Q4: What are the implications of BP's strategic reset for its future operations?

A4: BP's strategic reset involves a renewed focus on oil and gas production, with plans to increase its output by 2030. This shift away from low-carbon investments suggests that BP will rely more heavily on fossil fuels, potentially impacting its long-term sustainability and carbon emissions targets.

Q5: How does BP's market position compare to other major energy companies?

A5: As of 2024, BP is the fifth-largest investor-owned oil company globally by revenue, following ExxonMobil, Shell, Chevron, and TotalEnergies. Despite its significant size, BP has faced challenges in maintaining competitiveness, partly due to its strategic shifts and financial impairments.

Q6: What insights can be drawn from BP's energy outlook for 2024 regarding global energy trends?

A6: BP's 2024 energy outlook highlights a decline in oil demand due to improved internal combustion engine efficiency and the rise of electric vehicles. The outlook suggests that while fossil fuel consumption will decrease, investments in oil and gas will continue to play a significant role in the global energy system.

Q7: What are the projected environmental impacts of BP's current energy strategy?

A7: BP's current strategy, which emphasizes oil and gas, raises concerns about environmental impacts, particularly in terms of carbon emissions. The company has scaled back its commitment to low-carbon investments, potentially hindering efforts to reduce its carbon footprint in line with global sustainability goals.