By Barney Smith
For the reasons given in our analysis of the Shell results for 2021 (Greenbarrel of 4 May), AGMs of large international oil and gas companies are now of still greater importance than ever. The AGM of BP is on 12 May and the meeting will in theory be concerned with 2021, considering an in-house document entitled “Performing while Transforming” which seeks to evaluate how successful BP has so far been in turning itself from an oil and gas company into an energy company, a process which is only scheduled to be brought to a final conclusion in 2050. At this week’s meeting, BP will also have to explain how it intends to implement its decision to sell off its lucrative investment in the Russian oil company, Rosneft, as well as to explain more generally how it intends to address the long-term challenge of the climate.
For BP, like other large oil firms, has to aim to transform itself from an international oil and gas company into an integrated energy company with net-zero emissions by 2050, while continuing to keep its shareholders content. To the layman, this all-too-often comes down to how quickly is the company moving over to renewables, but here BP have been playing a very prominent role. BP, and its German partner, EnBW, have secured three long-term leases, two in the Irish Sea and one off Scotland, which are significantly important enough to register on the UK long-term energy plan, in which BP has recently pledged to spend £18 billion by the end of 2030. (BP, this time with Equinor, the former Statoil, has also acquired some major leases for wind farms in US waters.)
More generally, the company is pledged to increase the percentage of the budget allocated to expenses on non-oil and gas headings. The company’s target is for 40 per cent of expenditure by 2025 to be allocated to five sectors: renewables, convenience, biofuels, EV-refuelling and hydrogen. On biofuels the plan is to increase output from 26 mboed in 2021 to “Over 100” mboed by 2030. On EV-refuelling, BP, teamed up this time with Volkswagen, has undertaken to provide a further 4,000 charging units in the next twenty-four months on fore-courts in Germany and the UK. Hydrogen is playing a key role in decarbonising power, certain heavy industries and vehicle transport. (“Blue” hydrogen is extracted from natural gas, with the carbon dioxide captured and stored: “Green” hydrogen results from the electrolysis of water, using renewable power.)
But, of course, there will be elephants in the room tomorrow: how much structural damage will be done to BP by the decision to sell off the Rosneft stake, which at one time was shown in the accounts for over $20 billion. BP has used this problem to show a formal loss of over the first quarter of 2022. But alas this may not be enough. The fact is that the rise in the oil price has produced huge extra cash for all oil companies at a time when, at least in the UK, they need to persuade the politicians not to impose a “Windfall tax”. One solution is to embark on a major share buy-back campaign: BP’s in the second quarter of 2022 is worth over £2 billion.
This all seems like quite a lot of activity. But there are always those who want more and faster. Resolution 24 expresses some of this feeling but comes with the notation that the Board recommend voting against. At this stage, this just looks like a resolution whose support is unclear: but everyone will know that Exxon-Mobil’s intransigence on change last year led to three new members being voted onto the Board at the AGM, in spite of the opposition of the traditionalists.