The Fuse

BP to be “Net Zero:” Unpacking the Oil Major’s Announcement

by Gregory Brew | February 18, 2020

On February 12, 2020, the new CEO of BP made a major announcement.

Bernard Looney declared that the oil & gas major would achieve net-zero carbon emissions in all its operations by 2050. He also promised BP would achieve net-zero emissions in all its products by the same date.

“The world’s carbon budget is finite and running out fast,” said Looney. “We need a rapid transition to net zero.” Looney followed up the announcement with a statement on his Instagram account. “Simply put, we have to change,” he wrote. “We want to change. And we will change.”

The company currently produces 3.7 million bpd, holds 19 billion in proven reserves, and turns out 11.9 million tons of petrochemical products. Net emissions from operations total 55 million tons of CO2 equivalent (MteCO2e) while products emit 360 MteCO2e.

To accomplish the feat of net-zero emissions, Looney proposes a re-organization of BP’s entire corporate structure.

To accomplish the feat of net-zero emissions, Looney proposes a re-organization of BP’s entire corporate structure—away from the standard “upstream and downstream” division towards a four-part divisional system focused on Productions & Operations, Customers & Products, Gas & Low Carbon Energy, and Innovation & Engineering.

While details remain sketchy, Looney has promised a market day in September, where BP will set out its long-term strategy.

The slow rollout of the BP plan has led some to speculate that this may be a public relations move. It is reminiscent of BP’s “Beyond Petroleum” campaign, launched in 2000 and meant to rebrand the company as environmentally friendly.

Nor is it unique to BP. Shell famously declared itself to be a gas company first and foremost, following its purchase of BG Group in 2016.

It’s becoming fashionable for major corporations to adopt environmentally-friendly PR strategies. Net-zero promises have become very common. And the fine-print in BP’s declaration leaves quite a lot of room for interpretation.

But if it sticks to its commitments, BP could offer a model for other international oil companies (IOCs) to follow.

The IEA breaks down energy emissions into three categories. “Scope 3” emissions come from end-users. “Scope 1” emissions come from oil & gas company operations, while “Scope 2” covers the emissions from the energy used in those operations. While Scope 3 emissions make up the largest portion, Scope 1 and 2 make up more than 20 percent of total emissions—which make the companies themselves major emitters, with a major role to play in reducing emissions across the board.

According to IAE data in a recent report, the IOCs emit nearly 2,000 MteCO2e in oil production, 22 percent of which come from Scope 1 and 2.

The action would have to be unified in order to be effective. The IEA estimates that Scope 1 and 2 emissions from the oil & gas sector total 5,300 MteCO2e, or around 15 percent of global GHG emissions. This includes the operations of smaller independents and national oil companies (NOCs—companies that include Saudi Aramco, Petrobras, and the Kuwait Oil Company), which together produce considerably more than the IOCs.

Were all the IOCs to commit themselves to these goals, there would be a considerable cut to emissions.

Were all the IOCs to commit themselves to these goals, there would be a considerable cut to emissions. Many major companies have, like BP, announced emission goals or addressed the issue of cutting emissions in their PR material. Few have made any concrete plans to accomplish such goals, and investment outside of core operations constitute 1 percent of total capital expenditure, according to the IEA.

Yet small fixes could make a big impact. The IAE notes that the largest contributor to Scope 1 and 2 emissions are methane leaks, C02 venting and gas flaring—aspects of operations that could be prevented through regulation and improved practices.

While methane has long been targeted as a major source of GHG emissions, only recently has the oil & gas industry come under fire for methane leaks. The IEA notes it is the single largest contributor to Scope 1 and 2 emissions, dwarfing all other contributors. A single major leak, including one that occurred in a fracking site in Ohio in 2019, can have a major impact on total GHG emissions.

BP CEO Looney referenced the need to cut back on methane leaking as part of BP’s net-zero commitment.

Cutting back on methane is one step in BP’s journey. But it remains to be seen whether the company’s ambitious new agenda is truly attainable—or whether other companies will choose to follow in its footsteps.

 

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