The company plans to slash oil and gas output over the next decade and boost its investment into alternative energy sources.
  • BP’s plan to transform itself from an oil and gas company to an alternative energy solutions enterprise is viable, say analysts.
  • BP is mapping out its strategy amid growing calls from the public for the world to transition away from fossil fuels, linked to carbon emissions and rising global temperatures.
  • The company aims to cut its oil and gas output while increasing its investments into alternative energy and technology to about $5 billion a year in the next decade.

BP’s plan to transform itself from an oil and gas company to an alternative energy solutions enterprise amid calls for the world to transition away from fossil fuels and tackle global warming is viable, say analysts.

The U.K.-based energy giant revealed more details on Tuesday about its announcement from earlier in the year to become a net-zero carbon emissions company by 2050.

Within the next decade, the company plans to slash its oil and gas production by 40% and its refinery output by 30%, which will bring down its overall emissions. BP also plans to increase its investment into alternative energy tenfold, pouring about $5 billion a year into renewable energy, biofuels and hydrogen. The company plans to generate 50 gigawatts of renewable energy by 2030.

The oil major’s roadmap is the most ambitious one revealed by big oil companies so far, says Stuart Joyner, an energy specialist at the research firm Redburn.

“I think it’s doable,” Joyner told Karma. “There was more detail [in the plan] than most people were expecting.”

BP has made a series of investments into new technology companies and alternative energy sources over the years. Three years ago, the company bought a stake in Lightsource BP, which develops and operates solar power technology in 13 countries. It has also partnered with DiDi, an electric vehicle charging company in China.

The journey to transform BP will require adjustments.

“We want to move fast but will do so with real discipline and care — keeping our focus on safety and performance while we transform. Delivering long term value for our stakeholders,” said BP’s Chief Executive Officer Bernard Looney in a written statement. “And while we don’t have all the answers, collaboration and challenge have shaped our new strategy and it is better for it.”

The COVID-19 induced economic downturn has hurt the oil and gas sector. Companies have pared back on projected output. BP registered a $16.8 billion loss in the second quarter and cut its dividend in response to a tougher business climate.

Due to its transition plans, the company has warned that the next few years may not yield the generous returns on investment that investors are used to.

“We don’t see a huge amount of cash coming out,” said Joyner. “That’s always a risk for some of the companies that transition. Effectively because these are long-term growth businesses that they’re investing in and you don’t see the cash flow.”