BP writes off billions as Covid redraws rules of oil demand

BP writes off billions as Covid redraws rules of oil demand
Bernard Looney, the Kerry born CEO of BP who is leading a sharp pivot toward clean energy.

BP Plc will write down the value of its business by as much as $17.5 billion, as the oil major predicts that the coronavirus pandemic will hurt long-term demand and accelerate the shift to cleaner energy.

The company is also undertaking a review of its projects that could result in some oil discoveries being left in the ground.

It’s the latest in a series of big shifts from BP, which has pivoted sharply toward clean energy under its new, Irish Chief Executive Officer Bernard Looney. Shares fell 5% to 307 pence as of 8:15am in London.

“BP now sees the prospect of the pandemic having an enduring impact on the global economy, with the potential for weaker demand for energy for a sustained period,” the company said in a statement this morning. 

“The aftermath of the pandemic will accelerate the pace of transition to a lower-carbon economy.” BP’s actions will lead to non-cash impairment charges and write-offs in the second quarter, estimated to be in a range of $13 billion to $17.5 billion post-tax, the company said.

In February, BP outlined its ambitions to become a “net-zero” company by 2050. The company acknowledged that production will decline in the long term, and said whatever is pumped in 2050 “will have to be de-carbonized.” Peers including Royal Dutch Shell Plc, Total SA and Equinor ASA have also set out agendas for what’s becoming an existential challenge for the oil industry.

BP’s revised investment appraisal long-term price assumptions are now an average of around $55 a barrel for Brent crude and $2.90 per million British thermal units for Henry Hub gas, from 2021-2050, the statement shows.

“These lower long-term price assumptions are considered by BP to be broadly in line with a range of transition paths consistent with the Paris climate goals,” it said. “However, they do not correspond to any specific Paris-consistent scenario.” BP is scheduled to publish its second-quarter results on Aug. 4.

Bloomberg

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