BP PLC's CEO sees the International Energy Agency's recent report on reaching net-zero emissions by 2050 as well aligned with the company's decarbonization strategies.

Highlighting the report's call for the world to dramatically reduce annual investments in upstream oil and gas from the current rate of about $350 billion to $170 billion beyond 2030, BP CEO Bernard Looney said such a target "in many ways is consistent with what we're doing with the company." Looney noted BP's plans to reduce oil and gas production by 40% in the next decade.

"At the end of the day, it is a scenario," Looney said May 19 during the 2021 Columbia Global Energy Summit. "It is a scenario on a piece of paper, and what the world needs more than anything is maybe less scenarios and maybe less debate ... and more action, and that's what I think we're intent on doing, which is cracking on with the actions that we've set out."

Role in the transition

The CEO noted that to get the ball rolling on the energy transition, someone has to make the first move to build out infrastructure, deploy new technologies or start incentivizing demand for cleaner energy.

"If we just said we're going to do this in-step with society, we're stuck because nobody moves," Looney said. "And that's where I think we have a responsibility to lead, to basically pull people together, pull customers ... pull ourselves together and take what is otherwise an intractable problem and actually move it forward in a way which progresses the transition and equally doesn't destroy value for our shareholders."

The company has divested from the upstream space in recent years and is spending less on exploration for new hydrocarbons in favor of energy transition investments, the CEO said. While the oil and gas major used to spend between $17 billion and $19 billion on upstream operations, the company expects to spend between $7 billion and $8 billion in 2021, the executive said.

BP expects to produce 20% less volume in 2025 while generating higher earnings, Looney said.

"We think it's the right thing to do," Looney said. "We think it's right for our shareholders and our investors because, actually, we want to be the best-run hydrocarbons business, not the biggest hydrocarbons business, and therefore shrinking and focusing on value, focusing on margin is a way to do that."

By 2030, BP expects to be a diversified, lower-carbon energy company, de-risking the oil and gas major as an investment and offering higher shareholder value, the CEO said.

"We have more low-carbon in our business," Looney said. "We'll have more of what we call convenience and mobility in our business. We'll have some but less oil and gas in our business. And to get there, we're going to have a tenfold increase in low-carbon investment, about $5 billion per annum. We're going to have 50 GW of renewable capacity."

Policy push

However, the energy transition will require additional government incentives, especially for hydrogen and carbon capture technologies, Looney said, noting that BP intends to advocate for that type of involvement. Net-zero, transitional policies are a "huge part of our strategy," the CEO said.

"The reason that we have a burgeoning onshore wind business in the United States, the reason that we have a solar industry in the United States is because there were incentives put in place," the CEO said. "There will need to be those incentives to get things like carbon capture and storage, and potentially hydrogen, off the ground so that we can build a scale that takes the cost down and makes these industries self-sufficient without any form of incentives. So policy is very, very important."

BP supports hydrogen derived from both natural gas and renewable energy sources, Looney noted, especially given its potential role in reducing emissions from industries that will be difficult to electrify, such as heavy-duty trucks. Including natural gas-produced hydrogen in the mix will be important to mitigating demand on renewable energy sources, which also have a key role to play in decarbonizing the power sector, the CEO said.

"We need a hydrogen economy to take place," Looney said. "We need the infrastructure and the markets to get built. The best way to do that is to throw all of the hydrogen options at it."