BP to produce more oil and gas but insists it is still on road to net zero

ITV News Business and Economics Editor Joel Hills reports on BP's runaway profits

“I’m a bit biased but this is pretty brilliant.”

BP’s chief executive, Bernard Looney, clearly enjoyed presenting the company’s results to investors this morning.

It’s boom time for the company and its shareholders.

BP breaks even when the market price of oil is above $40 a barrel, during 2022 it averaged $101 and the company expects oil to average $70 a barrel until the end of the decade.

BP really is a cash machine at these prices and the temptation for Looney to “capture the upside,” as he puts it, must be overwhelming.

“The world is a different place to a year ago,” Looney told investors, revealing his intention to accelerate BP’s investment in both low carbon energy and, more controversially, traditional oil and gas extraction.

Between now and 2030, BP plans to spend an extra £6.7 billion on solar, wind, biofuel and hydrogen projects as well as electric vehicle charging points and convenience stores.

The company will increase spending on old-fashioned hydrocarbons by an identical sum over the same period.

Last year, BP produced the equivalent of 2.25 million barrels of oil a day around the world. By 2030 the company says that will fall to 2 million a day. The problem is that BP had pledged to cut oil and gas production to 1.6m barrels a day by then.

Raising gas and oil production targets at a time when the UN is warning that humanity is on a “highway to climate hell” is a tough sell.

“Governments and societies around the world are asking companies like ours to invest in today’s energy system,” Looney told the Financial Times.

He argues the last twelve months have shown how dependent the world remains on oil and gas - which is true - and that the drilling must intensify if there is to be a “secure, affordable and orderly” transition to Net Zero - which is less clear.

“We continue to believe that our ambitions and our aims, taken together, are consistent with the goals of the Paris Agreement (at COP 21 in 2015),” Looney insisted.

Unsurprisingly, climate campaigners are furious. Greenpeace accuses BP of “mining gold out of the vast suffering caused by the climate and energy crisis”.

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I suspect the concern will run deeper.

During last year, extraordinary sums of money have fallen into the BP’s lap as a result of the spike in oil and gas prices caused by the war in Ukraine.

Generally speaking, the company has used its record profits to reduce its debts and to reward its shareholders.

Nothing wrong with that. Although, it’s worth noting that BP could have chosen to use more of the money to ramp-up investment in renewables but decided not to.

BP operates in more than 70 countries globally. The company made a record annual profit of $27.6 billion (£23 billion) last year, it also paid a record amount in tax.

For the first time in a long time BP paid tax on its North Sea operations. The total UK tax bill was £1.8 billion of which £580m was a result of government’s windfall tax.

Since January, BP has been paying £3 in tax for every £4 it makes extracting oil and gas in the North Sea. The company says the tax rate of 75% is one of the highest in the world.

Food for thought for the chancellor ahead of next month’s Budget.