One of BP’s most profitable projects is a mass of cooling towers and steel pipes deep in the Oman desert, showcasing the British oil giant’s revolutionary natural gas extraction technology. According to financial papers obtained by Reuters, the facility generated BP Plc (BP.L) upwards of $650 million in earnings in 2019. Nonetheless, early this year, the oil firm offered to sell a 1/3 of its majority ownership in the project. The purchase is part of a bigger effort to sell fossil-fuel assets to earn funds for renewable-energy projects that BP admits will take years to pay off.
BP’s massive bet exemplifies the difficult decisions that Big Oil faces. Regulators and investors globally are putting increasing pressure on oil companies to create greener energy and divest from the fossil fuels, which are a major source of greenhouse gas emissions that contribute to global warming. This scrutiny has grown since the United Nations (UN) panel on climate change issued a historical report warning that increasing temperatures might soon spin out of control in early August.
BP CEO Bernard Looney, who assumed office in 2020 February, is betting that the company will be able to make the clean-energy shift considerably more quickly than its competitors. He was the first major oil Chief Executive Officer to proclaim that he would cut future production on purpose last year. He wants to cut BP’s output by 40 percent, or around 1 million barrels each day, which is almost the same as the UK’s whole daily output in 2019. BP would also raise its potential to generate energy from renewable alternatives to 50 gigawatts, which is a 20-times increase equivalent to power generated by 50 nuclear power facilities in the United States.
To meet those goals, Looney intends to sell $25 billion in the fossil-fuel assets by 2025. At the end of 2019, this amounted to roughly 13% of the firm’s revenue fixed assets. BP has already sold $15 billion in legacy projects under his leadership. In addition to Oman deal, Looney sold off BP’s entire petrochemical operation and unloaded gas and oil fields situated in both Alaska as well as the North Sea, resulting in a profit of about $402 million in the year 2019.
According to a Reuters investigation of financial files with Companies House, which is the Britain’s corporate registry, two of BP’s key renewables assets are losing millions of euros. Lightsource, which is a solar energy company owned by BP, lost $81.8 million in 2018 and 2019, the most recent year for which the data is available. Over the two years, the firm’s UK-based electric-vehicle charging unit, bp pulse, lost a total of 22.3 million pounds ($30.8 million).
Like other oil companies, BP does not usually reveal the financials of individual projects, so performance numbers for other properties which were recently bought or even sold by the company are unavailable. The results of the two renewable initiatives, as well as the Oman unit, have never been published before.