The announcement comes just days after Shell reported 2022 profits of $39.9bn, more than double that of the $19.3bn it posted in 2021.
The planned investment comes after bp said it expects carbon emissions from its oil and gas production to fall between 20-30% by 2030, compared to 2019 levels, a reduction from its previous target of 35-40%.
“It’s clearer than ever after the past three years that the world wants and needs energy that is secure and affordable as well as lower carbon,” said Bernard Looney, Chief Executive of bp. “To tackle that, action is needed to accelerate the transition. And – at the same time – action is needed to make sure that the transition is orderly, so that affordable energy keeps flowing where it’s needed today.”
bp has said it aims to accelerate the growth in earnings from its transition growth engines (TGEs) while also delivery “higher earnings than previously expected from its oil and gas businesses through 2030, revealing it plans to invest up to $8bn in TGEs and up to $8bn in oil and gas over the period to 2030.
H2 View understands the company is aiming to increase investment in its TGEs by up to $1bn a year on average, up to a cumulative additional $8bn to 2030 and expects to reach $7-9bn a year in 2030, with a cumulative investment of around $55-65bn over 2023-2030.
Under its updated strategy, bp plans to invest around half of the cumulative total in its established TGE businesses, such as bioenergy, and convenience and EV charging; with the other half set for hydrogen and renewables.
It expects to achieve returns of greater than 15% from bioenergy and from convenience and EV charging combined, as well as double digit returns from hydrogen.
Looney commented, “We will increase our focus on the transition growth engines able to deliver nearer-term solutions – like EV chargers and sustainable aviation fuels – that can help people and businesses decarbonise sooner. And we will continue to build our hydrogen and renewables and power businesses for the longer term, based around projects where bp’s integrated approach can create significant additional value.”
On hydrogen and renewables, bp has said it aims to “establish the foundations of a material business for the future,” to build a leading position in hydrogen to initially supply its own refineries before scaling up to meet growing customer demand, and as markets develop, global export hubs for hydrogen and its derivatives.
By 2030, bp aims to produce between 0.5-0.7 million tonnes of “primarily green hydrogen”, while also pursuing selected blue hydrogen opportunities.
However, the energy major also plans to increase investment into oil and gas projects, again by an average of up to $1bn a year, cumulative to $8bn to 2030, saying “the investment will help to meet near-term demand for secure supplies of oil and gas.”
The incremental investment to 2025 will target shorter-term, fast payback projects that will “maximise value and can deliver rapidly” with minimal infrastructure. It added that despite continuing to “high-grade” its global oil and gas portfolio, it now anticipates retaining some oil and gas assets “longer than previously envisaged.”
Looney said, “We need continuing near-term investment into today’s energy system – which depends on oil and gas – to meet today’s demands and to make sure the transition is an orderly one. We have high-quality options throughout our portfolio, allowing us to choose only the best. We will prioritise projects where we can deliver quickly, at low cost, using our existing infrastructure, allowing us to minimise additional emissions and maximise both value and our contribution to energy security and affordability.”
As a result of the changes to its oil and gas plans, bp anticipates its oil and gas production will be around 2.3 million barrels of oil equivalent a day in 2025, and around two million barrels per day in 2030, which it says will be around 25% lower than its 2019 production levels.
Comment from H2 View’s Content Director, Rob Cockerill:
“For all of the anger and backlash over these obscene profit announcements from the energy superpowers, shouldn’t the bigger observation concern the apparent red tape or hesitancy that is holding back alternative energies like hydrogen? Isn’t that the bigger question here – where is the clearly defined policy and standardisation across the value chain that is going to make hydrogen happen?
“Regardless of the brand or name on the balance sheet, it stands to reason that those currently executing our energy system will continue to profit from fossil fuels; they will directly benefit from geopolitical events that exert strangleholds on energy, and rightly or wrongly, they will leverage the strengths of existing infrastructure.
“Conversations around windfall taxes and counter moves from regional governments are one thing, but the question over hydrogen policy, red tape and perceived inaction is quite another. Fundamentally, until the latter is addressed and a clearly defined, actionable policy roadmap is in play, investments such as bp’s stated ‘$8bn more’ into ‘transition growth engines by 2030’ will continue to pale in comparison to record annual profits of nearer $30m. We have to get policy moving, get passed whatever the roadblocks are, and make hydrogen happen – and now.”