LONDON - BP’s last two bosses left under a cloud. The succession that will see Bob Dudley replaced by the UK oil major’s exploration and production division boss Bernard Looney is therefore admirably angst-free. The catch is that Looney’s job looks even trickier than his predecessor’s.
Dudley’s achievement was to steer BP through the disastrous 2010 Gulf of Mexico oil spill and largely restore its returns and output. Over the next decade, that cleanup might retrospectively seem like a picnic. Oil majors that get the transition to a low-carbon economy wrong could go bust.
Looney, who unlike Royal Dutch Shell and Exxon Mobil’s current bosses come from the oil drilling rather than the usually more cost-conscious refining part of the business, starts with some advantages. As a result of his efforts, BP’s production costs in 2018 were $7.15 per barrel of oil equivalent – lower than domestic rival Shell. That could become important in a world where politicians start to take seriously the need to limit global warming to well below two degrees Celsius compared to pre-industrial levels in compliance with the 2015 Paris Agreement on climate change. In such a world, only lower-cost production would stick within carbon budgets. A higher proportion of Shell and Total’s assets would wind up stranded in such a scenario, consulting firm Carbon Tracker said last month.
Looney could use investors’ current insouciance about green issues to hope for the best. His group’s recent acquisition of BHP’s U.S. shale assets – which will recover investment costs quicker than longer-term projects like Alaska, which BP just exited – are a hedge of sorts. What neither he nor fellow oil major bosses can control is how quickly increasingly obvious climate change will spur investors to reprice the cost of carbon.
While Dudley was much more vocal about the transition than U.S. rivals like Exxon, he has been slow to take Shell’s lead and discuss cutting carbon emissions from BP’s customers as well as from its own operations. Looney will have to grasp that nettle, as well as be prepared for a brighter spotlight on company’s assets. As was painfully proved on Wednesday, when the Royal Shakespeare Company dumped BP as a sponsor following student pressure, BP faces much trickier questions. Looney will need to find some answers.
- BP said on Oct. 4 that Chief Executive Bob Dudley, who has been at the helm for nine years, would retire at the end of March 2020. The oil major’s head of oil exploration and production, Bernard Looney, will succeed Dudley and join the BP board on Feb. 5.
- BP said on Oct. 2 that it was “disappointed and dismayed” that the Royal Shakespeare Company had decided to prematurely end its sponsorship.
- BP shares rose 0.6% to 488 pence as of 0800 GMT on Oct. 4.
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(Editing by Swaha Pattanaik and Karen Kwok)
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