February 15, 2023 [Financial Times] – Top low-carbon executive insists ‘no link’ between last week’s move and renewable energy’s lower returns
BP’s head of low-carbon energy said there was “absolutely no link” between the decision to maintain higher fossil fuel production and the lower returns available in renewable power as she defended the group’s energy transition strategy and outlined plans to maximise profits.
The British energy major stunned the sector last week with a decision to pare back its industry-leading commitment to cut its oil and gas production by 2030.
Chief executive Bernard Looney framed the move as a response to energy security concerns following Russia’s full-scale invasion of Ukraine and emphasised that the group would also increase spending on its low-carbon businesses by $8bn over the next eight years.
Anja-Isabel Dotzenrath, BP’s executive vice-president for gas and low-carbon energy, said the increased capital expenditure demonstrated the group’s continued commitment to rolling out 50 gigawatts of renewable power by 2030.
“[There is] absolutely no link between confidence in returns from renewables and the production target on the oil and gas side,” she told the Financial Times. “I have the support to deploy $30bn of capex to the end of the decade in my business . . . and I’ve seen what this company is capable of doing.”
Looney in 2020 launched one of the most ambitious energy transition strategies in the sector, promising to transform BP from an oil and gas producer into an integrated energy company ready for a net zero emissions world.
But the Irish executive has struggled to convince investors that BP can run renewables projects profitably enough to compensate for lost earnings from the fossil fuel business.
Dotzenrath, a former head of RWE Renewables who joined BP last year, said it would maximise profits from wind and solar projects by plugging those “green electrons” into low-carbon businesses with higher returns such as hydrogen production and electric vehicle charging.
In its updated strategy last week BP said it expected to deliver “double-digit” returns from its green hydrogen projects compared with 6 to 8 per cent for straight renewable power projects and more than 15 per cent for biogas, retail convenience and vehicle charging.
“This is why you will see us being very active in the Netherlands, Germany and the UK because this is where we have excellent integration options with hydrogen, with e-mobility, with trading, with e-fuels,” Dotzenrath said.
BP recently chose not to bid in an offshore wind auction in California because it offered fewer integration opportunities with other assets and would not deliver financial returns until the 2030s, she said. “California is great but it is an option for the middle of next decade.”
BP poached Matthias Bausenwein from Orsted last year to head a reorganised offshore wind division. Dotzenrath said the team would be selective in offshore auctions. “Our resources are better deployed to options and auctions [that] give us line of sight to green electrons earlier.”
BP last year agreed a partnership with Marubeni, the Japanese trading and investment group, to pursue offshore wind opportunities in Japan where Dotzenrath said there were “big synergies” with BP’s existing customer base.
BP also plans to make the most of its existing footprint in India. “We know exactly how to deliver major projects in India so this is a big competitive advantage compared to the traditional renewables players,” she said.
BP’s spending on its five “transition” businesses — biofuels, convenience, charging, renewables and hydrogen — was 30 per cent of group capital expenditure in 2022. Looney plans to increase that to 40 per cent by 2025 and 50 per cent by 2030.
“I am not aware of any other comparable company in our sector who does this and is as clear about it,” Dotzenrath said.