Under the leadership of former CEO Lord Browne, British Petroleum had made steps to move its business model beyond only petroleum and into newer and greener energy sources.
But with oil prices at record highs, and expected to stay there, new CEO Tony Hayward has decided to forget about environmental initiatives and return BP to its profitable roots.
The move is part of Hayward’s larger overhaul of the energy giant, including a cost-cutting program that will see 14,500 jobs cut and nearly $1 billion trimmed from overhead costs. The company has decided that high oil prices are here to stay, and has decided to maximise its profit by focusing on that area including a much greater investment in the Canadian oil sands. The oil sands in Canada have recently been in the news after being labelled “the most destructive project on Earth”.
Hayward’s plans have angered both environmental groups and former CEO Lord Browne. Browne took a veiled dig at the company recently when he said some energy groups were in denial about reducing their carbon output. Greenpeace called BP’s recent actions a “climate crime”. Hayward has recently cut investment in the company’s alternative energy holdings, and completely abandoned a groundbreaking proposed carbon capture and storage project in Peterhead, Scotland.
Hayward has made it clear that unprofitable energy sources, no matter how green or popular, will not find favour during his time at BP. The company, while still very profitable, has lost much of the financial clout it once had. An explosion at one of its refineries, pipeline spills, and a series of trading scandals all damaged the company’s reputation and bottom line in the past few years, leaving it vulnerable to a takeover on the stock exchange. Despite record oil prices, the company’s profits dropped more than 20% to a still massive $17.3 billion.
Environmental groups have already begun to speak out about the company’s new strategy. James Marriot, of the activist group Platform, said: “Moving into the tar sands of Canada and dropping a carbon capture and storage plan for Peterhead are part of a recarbonisation of BP. It might help the share price in the short term but longer term Hayward is exposing the company to the dangers of a rising carbon price [for CO2 emissions permits] and falling oil price.”
Some BP staff are even thought to disagree with Hayward’s decisions as they envision a future where businesses pay a heavy toll for their emissions. Many believe world governments will take drastic action to reduce carbon emissions, and high polluting businesses like oil companies could pay a steep price.
Lord Browne believes carbon will be the biggest issue facing energy companies in the next few years, saying: “Carbon is coming and it will impose costs on conventional energy sources. Energy businesses should not live in a state of denial, but work constructively with governments to ensure a smooth transition. The challenge is to reduce emissions against business-as-usual projections, which does not necessarily mean revolutionising existing energy infrastructure. The key is to displace high-carbon options with low-carbon options in the choices we make from now onwards about new energy capacity.”