As the world shifts to green energy for new-age mobility solutions, oil giants are now in line with the goal. A recent testimony to that comes from London based BP, which has announced its 2030 goal to cut down oil and gas production by at least 1 million barrels a day.
The move would mark a 40 percent reduction from its production standards in 2019. In addition to cutting down on the extraction of fossil fuels, the company would also invest up to $5 billion every year into green energy.
The confirmation for the major strategic overhaul of the oil giant comes through a recent CNN report. As per the report BP¡¯s recent decisions to move to clean energy are aligned with its earlier promise of reaching net zero emissions by 2050.
But why would an oil major cut down on its own business practices to invest in renewables? We try to take a look here.
In a recent statement, BP said "this coming decade is critical for the world in the fight against climate change, and to drive the necessary change in global energy systems will require action from everyone."
That surely includes firms like BP responsible for supplying oil and petroleum products to many countries across the world. However, the decision to move to renewables might be less out of BP¡¯s own conscience and more of the market predictions for the oncoming decade.
In a note to investors, BP head of strategy Giulia Chierchia said that the company expects global demand for fossil fuels to fall by 75 percent over the next 30 years if the increase in global temperatures is limited to 1.5 degrees celsius.
This might be due to increasing policy frameworks propelling the use of electric vehicles in place of fossil fuels for a greener commute. A severe drop in demand of oil and gas across the globe due to the Covid-19 pandemic might also be the trigger for the shift.
This will mark a drop of ¡°at least one million barrels a day by 2030¡± in oil and gas production. For the first half of the oncoming decade however, the bulk of BP¡¯s annual capital expenditure will still be in oil and gas.
"We believe that what we are setting out today offers a compelling and attractive long-term proposition for all investors," CEO Bernard Looney said in a statement.
BP has already started acting on the transition. The company sold its petrochemicals unit, and announced plans to cut 10,000 jobs as part of a massive restructuring in 2020 that is expected to cost $1.5 billion.
The transitional period for the company will involve major investments into several areas of clean energy. As per the CNN report, these sectors would include bio-energy, hydrogen and carbon capture as well as storage.
In addition to energy supply, BP would also focus on establishing its own electric vehicle charging points. The firm targets a total of 70,000 such points, up from 7,500 at present. Simultaneously, BP will reduce its oil and gas refining portfolio, targeting to raise $25 billion by selling its assets over the next five years.