IN CONVERSATION
Can BP succeed at moving beyond petroleum ?
BERNARD LOONEY HAS HAD A LIVELY FIRST TEN MONTHS AS THE NEW CEO OF BP . JUST TWO MONTHS AFTER TAKING THE HELM OF THE WORLD ’ S FIFTH LARGEST OIL MAJOR , AN INTERNATIONAL PRICE WAR WAS OVERSHADOWED BY A GLOBAL PANDEMIC , SENDING THE PRICE PER BARREL OF OIL INTO NEGATIVE NUMBERS FOR THE FIRST TIME EVER .
Before all that , Looney had been gearing
up to take on the issue everyone presumed would dominate his first few years : climate change . The challenge the issue presents to an oil major is balancing the clear need to act on climate change with continuing to pay shareholders the dividends they expect . The pandemic has made it that much harder to balance the two , yet Looney talks even more persuasively of leading the world ’ s transition to cleaner energy as his primary goal .
With the focus of this issue being the adaptation and transition of the industry Margaret Major , managing editor of Fuel Oil News , talks with Boris Ivanov , founder of GPB Global Resources BV , to hear his thoughts on the likelihood of BP achieving this goal
Do you think oil companies like BP are well poised at this time to transition to clean resources ? “ An oil major moving into greener sources is a mammoth task – this kind of huge transition really has no precedent and is nearly impossible to predict . The success of such a significant strategic change will largely come down to leadership , cultural change and learning from mistakes that others made before them . Oil supermajors such as BP have some of the best engineering and risk management expertise in the world and are very much used to dealing with regulatory affairs and changing public opinion . These are exactly the skills needed for successful decarbonisation but , up until now , it has never been a priority for shareholders .
20 Fuel Oil News | November 2020
Now , in a world increasingly committed to going green , there is pressure from all sides to move away from oil and the pandemic has only strengthened commitments to a shrinking
Boris Ivanov carbon footprint . Shareholders are demanding a shift , so BP and other supermajors now have tangible motivations to dedicate the resources and budget necessary to progress their decarbonisation strategies .”
How much of this do you think comes down to investor pressure ? “ I believe that ultimately , investor pressure is the only factor that matters . Outside of petroleum at petrol stations , everyday consumers are not all aware of the complexities , products and processes it is involved in such as production of fertilizer , plastics , construction materials , and even medication , such as aspirin , for example . So , as long as those activities make a profit for investors , they have the discretion to decide whether such profit models are viable for the long term and whether they should be also considered against wider issues , such as protecting the environment .
“ Earlier this year , BP CEO Bernard Looney commented that investors pushing and questioning the purpose of the firm had begun to weigh on BPs financial performance . It ’ s hard to know whether investors truly want to remove energy stocks from their portfolios , or whether this pressure is actually coming from their clients – it ’ s probably a mixture . Wherever its originating from , the pressure is there , and it is growing , so BP has had no choice but to respond . BP ’ s green energy plans could prove to be expensive and financially risky , as the outlook for the oil industry continues to look uncertain . This was reflected in investor sentiment as BP ’ s share price tumbled to a 25-year-low when the company ’ s ambitious transformation plans collided with fears for the future of the global oil market ( 14 Oct 2020 ). While successful core business transformations have occurred , not every large corporation has survived changing market environments . We do not have to look any further than the fate of Nokia and Eriksson in the cellular communications segment .“
This isn ’ t the first time BP has tried to position itself as being ‘ beyond petroleum ’ – is there any reason to believe things will be different this time ? “ It ’ s true BP promised to move ‘ beyond petroleum ’ in the 90s , but that was , as far as I know , only a marketing slogan for BP ’ s gas stations . You can hardly find anything in BP ’ s statements , financials or other publicly available company materials from the 1990 ’ s to substantiate a strategy of giving up on oil . It is important nevertheless , as it shows that the company noticed changing consumer opinions .