BP will write down the value of its business by as much as $17.5 billion (€15.5bn), as the British oil major predicts that the coronavirus pandemic will hurt long-term demand and accelerate the shift to cleaner energy.
The company is also undertaking a review of its projects that could result in some oil discoveries being left in the ground.
It’s the latest in a series of big shifts from BP, which has pivoted sharply toward clean energy under its new chief executive officer, Bernard Looney. Shares fell 5 per cent to 307 pence in London on early trading.
“BP now sees the prospect of the pandemic having an enduring impact on the global economy, with the potential for weaker demand for energy for a sustained period,” the company said in a statement on Monday.
“The aftermath of the pandemic will accelerate the pace of transition to a lower carbon economy.”
BP’s actions will lead to non-cash impairment charges and write-offs in the second quarter, estimated to be in a range of $13-$17.5 billion post-tax, the company said.
In February, BP outlined its ambitions to become a “net-zero” company by 2050. The company acknowledged that production will decline in the long term, and said whatever is pumped in 2050 “will have to be de-carbonised.”
Peers including Royal Dutch Shell, Total and Equinor have also set out agendas for what is becoming an existential challenge for the oil industry.
BP’s revised investment appraisal long-term price assumptions are now an average of about $55 a barrel for Brent crude and $2.90 per million British thermal units for Henry Hub gas, from 2021-2050, the statement shows.
“These lower long-term price assumptions are considered by BP to be broadly in line with a range of transition paths consistent with the Paris climate goals,” it said. “However, they do not correspond to any specific Paris-consistent scenario.”
BP is scheduled to publish its second-quarter results on August 4th. – Bloomberg
