By Ron Bousso and Shadia Nasralla
LONDON (Reuters) - BP (LON:BP) set one of the oil sector's most ambitious targets for curbing carbon emissions on Wednesday as new chief executive Bernard Looney began the biggest revamp in its 111-year history.
While investor groups welcomed the 2050 targets set out by Looney, which put BP ahead of rivals Royal Dutch Shell (LON:RDSa), Total, Equinor and all of the U.S. oil majors, environmental campaigners criticised a lack of detail.
"We have got to change and change profoundly because the world is changing fast and so are society's expectations of us," Looney said in his first major speech as CEO, after earlier highlighting a need to "reinvent BP".
"It is aiming to reduce and neutralise the carbon in the oil and gas that we dig out of the ground," Looney added.
BP did not say how it intends to get emissions from its operations and barrels produced to net zero and halve the intensity of emissions by all products it sells, including diesel and petrol, a measure known as Scope 3.
The company has tried, and failed, to reinvent itself before, with a pioneering plan to build a large renewables business in the early 2000s which ended with huge losses.
One possible way to hit greenhouse gas reduction targets is to buy offset certificates and bet on carbon capture and storage technology, which is not yet used on a commercial scale.
But Charlie Kronick, Oil Advisor from Greenpeace UK, was sceptical about how BP can deliver.
"How will they reach net zero ... When will they stop wasting billions on drilling for new oil and gas we can't burn?"
Shares in BP were up 1.3% at 1423 GMT, roughly in line with the broader European energy sector index after the news, which confirmed a Reuters report in January.
RAPID TRANSITION
The world's top oil and gas companies are under heavy pressure from investors and climate activists to meet the 2015 Paris climate goal of limiting global warming to below 2 degrees Celsius from pre-industrial levels.
U.S. groups such as Exxon (NYSE:XOM), Chevron (NYSE:CVX) and ConocoPhillips (NYSE:COP) are far less ambitious with their greenhouse gas reduction targets than their European rivals.
Stephanie Pfeifer, a member of the global Climate Action 100+ Steering Committee and CEO of the Institutional Investors Group on Climate Change welcomed BP's plan.
"Building on the positive engagement with BP ... investors will continue to look for progress from the company in addressing climate change. This includes how it will invest more in non-oil and gas businesses," she said in a statement.
BP's absolute net zero carbon target relates to every barrel it produces, based on its equity stake in oil and gas fields, from the well to the petrol station. It does not encompass oil products which BP markets, but does not produce itself.
BP, which produced around 2.64 million barrels of oil equivalent per day in 2019, said it would cut emissions to net zero from some 415 million tonnes of carbon dioxide equivalent a year.
Near term plans will be published by a September investor day, Looney said, adding BP is likely to produce fewer barrels by 2050.
"We welcome BP’s recognition of the reality we now live in but 2050 is too late," a spokeswoman for climate change activist group Extinction Rebellion said.
Graphic: Oil majors' carbon emissions https://fingfx.thomsonreuters.com/gfx/editorcharts/OIL-CARBON/0H001QEMZ7NW/eikon.png
Anglo-Dutch group Shell has set Scope 3 targets based on intensity rather than on absolute reduction terms.
Intensity-based targets measure the amount of greenhouse gas (GHG) emissions per unit of energy or barrel of oil and gas produced. That means that absolute emissions can rise with growing production, even if the headline intensity metric falls.
Scope 3 emissions vastly exceed greenhouse gases caused by the production of crude oil, natural gas and refined products, including electricity generation, typically by a factor of about six among oil majors, according to Reuters calculations.
'NEW EXPECTATIONS'
BP will also set "new expectations" for relationships with trade organisations and be ready to quit if they are not aligned.
Last year, BP invested around $500 million in low-carbon technologies including wind power, electric vehicle battery charging systems and solar power firm Lightsource BP. That compared to an overall budget of $15.2 billion in 2019.
In perhaps its biggest-ever corporate shake-up, BP will dismantle the traditional model of an oil and gas production, or upstream, unit and a refining, trading and marketing, or downstream, unit to "become more integrated and more focused".
A new production and operations unit, which includes oil and gas production as well as refining and chemicals, will be led by Gordon Birrell. Meanwhile, customers and products will be led by Emma Delaney, gas and low carbon energy by Dev Sanyal and innovation and engineering by David Eyton.
Graphic: Going green? https://fingfx.thomsonreuters.com/gfx/editorcharts/OIL-RENEWABLES/0H001QXXMBJP/eikon.png